Price and market trends: Bearish trend for Europe ethanol prices

12 April 2013 09:54  [Source: ICB]

A significant proportion of European traditional ethanol second-quarter contracts have now been concluded, and market participants indicated on 3 April that a downward price trend has prevailed in most cases.

A modest downward trend was indicated for second-quarter contracts on molasses-based 96% beverage grade.

One producer said its contract prices had fallen by at least €1/hl ($1.28/hectolitre), bringing its prices into the range of €74-79/hl FD (free delivered).

EU Ethanol

The source said that unseasonably cold weather is undermining demand at a time of year when offtake usually increases sharply. The producer added that imports from Pakistan are having a greater impact on the market than they would if consumption levels were higher.

One reseller said that it had concluded its second-quarter contracts at price levels that were €1-2/hl lower than the assessed range of €75-80/hl FD France and Germany.

The source said it was not seeing any impact on demand specifically as a result of the continuing low temperatures, but acknowledged that there has been some erosion overall.

Other sources had previously said that decreases of €1-2/hl would be representative for the majority of second-quarter contracts, citing an oversupplied market resulting from increased imports and reduced offtake. Summer is traditionally the peak beverage consumption season in Europe, but macroeconomic weakness is expected to erode demand.

INDUSTRIAL TREND UNCLEAR

The second-quarter price trend for 99% industrial grade is less clear than for beverage grade, owing to differences in raw material costs and derivative demand.

One producer said its prices were stable in some cases, but large buyers had managed to negotiate price cuts of around €1/hl. The source suggested that €77-81/hl FD was a representative range for northwest Europe.

Prices for 99% industrial grade are assessed by ICIS at €78-82/hl FD France and Germany.

A producer of synthetic ethanol said it had concluded its contracts at a mixture of rollovers and small increases.

Another synthetic producer last week said that its raw material costs had increased significantly and it would aim to recover margins wherever possible.

Ethylene is the main feedstock for synthetic ethanol, and the monthly contract price movement has become more volatile since the start of 2012.

While the March contract increased by €50/tonne, putting pressure on producers' margins, the April price was agreed at a decrease of €60/tonne.

A UK ethanol reseller said that it is targeting rollovers, but one or two of its second-quarter contracts have been concluded at a slightly lower price compared with those settled during the first quarter.


By: Samuel Weatherlake
+44 20 8652 3214



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