The T2 ethanol curve came under pressure in Thursday morning's paper trading session as news reached the market that a 25,000 cu m US cargo was booked to load in the second half of December, likely arriving in January, with destination the UK and the Amsterdam-Rotterdam-Antwerp hub.
By midday, January was Eur8 lower on the day at Eur508/cu m (about $580/cu m), following a rally both on physical and paper this week.
It is not fully determined whether the cargo is fully fuel ethanol and whether perhaps destined for the T1 market. In the past, it has not been uncommon to see US cargoes go through ARA but with Norway as their end destination.
One source said that part of the cargo is likely industrial volume for Norway and France, but another said that the volume seems to be coming from a fuel producer in the US. The fact that the vessel is stopping through the UK is also making most suspect that there is at least some fuel ethanol in the mix and besides, with the recent rally in T2 prices, it also makes sense price-wise.
An open US arbitrage into Europe is often a source of panic for the European market and even if the volume is not big, sentiment alone is often enough to put the market under a lot of pressure.
European ethanol margins are in a precarious state, as expensive feedstocks have raised the price floor, especially for those producers running on wheat, but weak US prices have also lowered the ceiling. Already two European plants have announced shutdowns so far, both in the UK, so any future trade flows could be critical for European production.
