Industrial 99%
European ethanol market focus is on INEOS, which declared force majeure on its 340,000 tonne/year synthetic ethanol production on 25 July at Grangemouth, in the UK, because of an unexpected shutdown. Duration for the downtime and FM have not been disclosed.
There are already some indications that INEOS’s production problems have further tightened ethanol supply for industrial grade ethanol, particularly in the UK, as INEOS is the sole domestic synthetic ethanol producer in the UK. There have also been some knock-on effects in northwest Europe, as INEOS also exports volumes to mainland Europe.
Resellers in the UK and suppliers in northwest Europe said they have seen an increase in requests for industrial grade ethanol, particularly from non-regular customers, but are struggling to accommodate them, amid already low inventory levels.
Players are keen to monitor how long the INEOS production problems will last and expect that the European supply situation could become more critical.
Despite the summer holidays, there is little-to-no evidence of any slowdown in demand in the UK and northwest Europe, which could have provided some much needed respite to supply problems. Some suggest that any lull in demand during the summer months is masked by overriding supply constraints.
In addition, others contest any seasonal dip taking place in the UK and northwest Europe, stating that it is only really limited to the Mediterranean in August. They maintain that sales in personal care products remain generally good during the summer months, adding that there is normally some pre-buying in northwest Europe for the winter screenwash season and fragrances sector, ahead of Christmas.
In contrast to the UK and northwest Europe, one player speculates that the industrial 99% ethanol market in the Mediterranean is likely to be largely unaffected by INEOS’s production problems in August, as they coincide with the height of the summer holiday season in the region.
While prices in Italy are expected to remain unchanged during August, the same sources suggests that if the production difficulties continue after the holidays, then it could push industrial 99% prices higher and the gap between industrial 99% over beverage could increase.
The general expectation is that industrial grade ethanol prices will trend up during the coming weeks, due to increased supply constraints, which is further supported by news of the higher ethylene feedstock costs for August.
There are already some indications that industrial 99% spot ethanol prices have moved up with immediate effect.
Prices for spot industrial 99% in the UK are frequently heard in the low-to-mid £900s/tonne FD as a minimum, with business heard up to around £1,000/tonne FD NWE from one seller.
To reflect a slightly firmer sentiment in the UK, prices are edged up slightly by £10/tonne to £910-990/tonne FD.
This also takes into account existing quarterly contracts, which are generally heard in the low £900s/tonne FD. Prices down to £900/tonne FD are also heard, but they are not widely confirmed.
In northwest Europe, a few sellers said they have already upgraded their industrial 99% spot prices to €82-83/hlt FD. One trader is even more bullish, stating that it would look for at least €5-10/hlt above the contract level. However, there is insufficient market confirmation to substantiate this.
Numbers of €80/hlt FD for industrial 99% grade ethanol remain valid for existing quarterly contracts in northwest Europe. However, one producer contests prices of €80/hlt FD for Q3 business, stating that it has not concluded its Q3 contracts below €83-85/hlt FD.
Beverage 96% molasses
The beverage ethanol market remains healthy and supply stays tight, although not to the same extent as its industrial counterpart, because of it is not affected by the synthetic ethanol production problems.
Beverage ethanol supply in Europe, however, is restricted, because of continued favourable margins for sugar and grain over ethanol, globally poor harvests over the last year, concerns about the next Brazilian harvest and the gap between the next harvest campaign in Europe, which is due to start in August/September.
The ongoing scarcity of imports, caused by strong demand and higher prices outside the region, is also a limiting factor on overall ethanol availability in Europe.
Beverage grade ethanol prices remain stable this week, largely quoted within the existing ranges, following the implementation of recent price increases in Q3, as already reflected. The uptrend has been driven by tight supply, high feedstock costs for grain and sugar and good demand.
One fermented ethanol producer considers beverage prices higher than reflected in the published range, stating that it had concluded its Q3 business at €82-83/hlt on average and reporting deals up to €85/hlt FD, although it acknowledge that the latter is an exception rather than the norm. There is however, insufficient market confirmation to substantiate these higher levels.
Looking ahead, buying sources remain hopeful that the next harvests in Europe may bring some relief to the supply situation. However, sellers are not as optimistic, stating that even if the next European crops are good, inventory channels are dry across the board and need to be refilled. They also stress that demand for both ethanol and grain and sugar continues to outpace supply, particularly because of the lack of new distillation and rectification capacity in Europe.
Production
A staggered maintenance schedule continues at multiple plants in northwest Europe during the summer months for at least one fermented ethanol producer.
In the Mediterranean, one fermented ethanol plant is scheduled to shut down for planned maintenance in mid-August for approximately two weeks.
The European fuel ethanol market is experiencing illiquid conditions this week. Prices for standard T2 material are quoted between €625-630/CBM FOB Rotterdam, up €5/CBM on the lower end of the range. It is thought that German renewable energy directive (RED) certified material is trading up to a €20/CBM premium over standard T2 material. T1 prices are quoted between $845-870/CBM FOB Rotterdam, although one source says that T1 material from the US is offered at levels of up to $940/CBM FOB Rotterdam.
Upstream
The European ethylene contract settled at €1,120/tonne FD NWE for August, up by €30/tonne from July. The increase was driven by firm feedstock and a better-than-expected outlook for demand. Spot numbers are rising and have reached the low €1,000s/tonne on the pipeline
($1 = €0.70)
This week in ICIS ( www.icis.com):
29 Jul 11 13:30 Europe August propylene fully settles after second number emerges
28 Jul 11 06:35 Germany’s BASF second quarter net profit up 23% to €1.45bn
27 Jul 11 17:17 Europe August ethylene fully confirmed at €1,120/tonne
