Price and market trends: US players may shift to produce more fuel ethanol

14 April 2014 00:00 Source:ICIS Chemical Business

Should US fuel ethanol prices continue to firm this year, industrial ethanol suppliers may shift to more lucrative fuel ethanol production, an ethanol trader said on 31 March on the sidelines of the International Petrochemical Conference (IPC), run by the American Fuel & Petrochemical Manufacturers (AFPM).

The US ethanol trader added that it would be easier for large industrial ethanol suppliers to shift to fuel ethanol production, compared with smaller niche industrial ethanol suppliers.

US spot fuel ethanol prices have firmed in March mostly on continued railroad transportation issues, as well as short-covering and the looming summer driving season, pushing prices to their highest levels since June 2006.

US fuel ethanol

Ethanol buyers were very aggressive, as some producers were caught with short supplies and as temperatures have turned warmer, signalling the start 
of the spring and summer driving season.

Additionally, producers continue to struggle getting supplies to the east and west coasts, as a lack of rail cars plagues the industry.

The transportation situation has become so bad that fuel ethanol prices remain high, even though production has also been high, as a result of low corn prices.

Corn futures fell to $4.20s/bushel range in early 2014 before recovering to settle at $4.92/bushel on 27 March. However, prices were over $7.00/bushel in summer 2013.

However, industrial ethanol prices have also been on the rise of late.

US industrial ethanol contract prices for the second quarter of 2014 were assessed higher by 15 cents/gal on 28 March because of rising price of corn futures and that lack of rail cars that has plagued the fuel ethanol industry was also helping to support industrial ethanol prices.

Additionally, industrial ethanol supplies have been tight in the first quarter as a result of an active flu season and increased exports. Ethanol is used in consumer hand sanitizers.

By Brian Balboa