The European T2 ethanol price has fallen to its lowest in more than three months as increasing supply, slowing demand and the threat of the US arb opening have weighed on the market in recent weeks.
T2 ethanol was assessed at Eur450.50/cu m FOB Rotterdam Monday, down Eur11.50 from a week before and the lowest since the end of October.
This has also resulted in production margins being squeezed, estimated at Eur26.60/mt and Eur40.10/mt for EU milling wheat and corn respectively, around the three-month low mark as well.
The Amsterdam-Rotterdam-Antwerp hub has remained well supplied over the last couple of months, despite the shutdown of the Vivergo ethanol plant in the UK since early December.
As a result, the addition of some imported volumes from Central and South America, as well as some product from Germany and Hungary being offered into ARA, have seen the pressure mount in the Northwest European market, especially at a time of seasonally weak demand.
Meanwhile, uncertainty over the imminent expiry of the antidumping duty against US product continues to weigh on market sentiment, especially as the arbitrage is not too far off break-even level.
The US market has always been seen as placing a cap on the European market and so European producers fear the worst, should a removal of the duty materialize, especially as they see their margins already being squeezed.
Currently, the T2 curve is pricing on the basis that the duty will be removed, but confirmation of such an event is likely to impact sentiment and prices further, at least in the immediate aftermath.
At this point, however, market participants agree it is not worth taking the risk of booking any volumes if there is not enough of a margin to make it worthwhile amid all of this uncertainty. Besides, the Chinese market is still more attractive for US exporters than Europe.
Finding product in the US that is ISCC certified and meets a minimum of 50% GHG savings as is the EU requirement will also somewhat limit the volumes that could flow, but the prospect could be enough to push the European market to the brink.
