08 January 2014 17:28 [Source: ICIS news]
LONDON (ICIS)--European T2 fuel ethanol prices decreased this week on low demand that is normal for this time of year, sources said on Wednesday.
The first quarter is typically weak amid seasonally low demand for gasoline blending components.
Driving rates are low at this time of year, after the holidays and with low temperatures, and so gasoline consumption is generally down.
Participants were not surprised by the decrease itself, but a trader said the scale of the drop was unexpected.
Prices are such that many producers are not believed to be operating with profits. Sources estimated that wheat-derived ethanol will be giving negative margins at these prices, although corn-based production is still likely to be profitable.
Larger producers are expected to continue production even when making loss in order to maintain market share. Smaller producers may well shut down for a time, until prices increase. Operating rates are not likely to be high at present, sources said.
The import of US-origin E48 gasoline (gasoline with 48% ethanol) is no longer workable, which should offer some support to European producers.
However, the market is expected to remain weak until the second quarter, when gasoline blending usually picks up in anticipation of the summer high-season.
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