Most Europe Q2 ethanol contracts see slight decreases from Q1

10 April 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--Participants in the European traditional ethanol market confirmed on Wednesday that the overall trend for second quarter 2013 contract prices was down from the first quarter of the year.

Decreases were modest, amounting to €1-2/hl ($1.32-2.63/hectolitre) in most cases. Rollovers and slight upward movements were also recorded on 99% industrial grade.

Molasses-based 96% beverage grade ethanol prices were assessed by ICIS at €74-78/hl FD (free delivered) France and Germany, while prices for 99% industrial grade were assessed at €76-81/hl FD France and Germany.

The largest decreases were heard on 96% Rectified Neutral (REN) grade, where second quarter contract prices were heard concluded down by €2-3/hl.

Second quarter contracts for molasses-based 96% beverage grade were settled at modest decreases as a result of the well-supplied European market and poor demand.

Sources said that duty-free imports from Pakistan had increased availability during the first quarter, while macroeconomic concerns and unseasonably cold weather in recent weeks have undermined consumer demand.

A producer noted that market fundamentals for grain-based product are entirely different, and prices have not changed for the second quarter. 

Sellers emphasised that current price levels are not sustainable because their margins are too narrow.

However, some suggested that the impact of Pakistani imports will be confined to the first half of the year. In addition, the prospect of warmer weather may improve off-take in the coming months.

A broader range of second quarter contract price outcomes was heard on 99% industrial grade, which sources explained in terms of differing feedstock costs and quality requirements.

Prices were concluded mostly at modest decreases and rollovers, although some slight upward movement was also indicated.

Prices for high-quality industrial grade, used for cosmetic and pharmaceutical applications, were heard at a premium of approximately €2/hl to normal product.

A large buyer said its suppliers had proposed second quarter contract prices of €72-76/hl FD Germany, but this was well below the price levels heard from other sources.

The majority of UK prices were heard settled at rollovers and slight increases, with a producer of synthetic ethanol saying it had implemented a "firm rollover" for its second quarter contracts.

A re-seller observed that demand in southern Europe is down on economic concerns, with one of its subsidiaries in Italy reporting a year-on-year fall in domestic offtake of 10%.

The source noted that consumers which export a proportion of their output are performing more strongly than those dependent on domestic demand.

Another reseller said it had recently sold a parcel on the European spot market at €930/tonne FD, which it said was equivalent to about €73.50/hl FD.

Participants in the 96% REN grade market said that second quarter contracts had fallen by €2-3/hl, bringing prices to around €61-63/hl FCA (free carrier) Rotterdam.

A supplier said it was not sure why the European market was under so much pressure, but felt that Pakistani imports were likely the main reason.

The source suggested that the long winter meant the next screenwash production season would be a very active one, and would begin in August.

Spot prices for 96% REN grade ethanol were heard most recently at €63-65/hl FCA Rotterdam.

($1 = €0.76)

By: Samuel Weatherlake
+44 20 8652 3214

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