A raft of issues at domestic ethanol production facilities across Europe is likely to support prices into 2016 and may see Europe needing to import 30,000 cu m/month to compensate, sources said this week.
Platts T2 ethanol assessment moved to Eur667/cu m Wednesday, up from Eur661.25/cu m Tuesday, the highest level since May 16, 2013.
Alongside the move up on physical, the forward six months of the paper curve assessed by Platts also increased, with the front-month swap moving up Eur5/cu m to Eur605/cu m, the highest level since July 31, 2013, and the second-month swap up Eur6/cu m at Eur574/cu m, also the highest level since July 31, 2013.
Sustained tightness in European supply was sending traders hunting for arbitrage opportunities, most notably from the US where prices were on a bearish run.
Despite the arbitrage from the US providing "break-even" opportunities, according to one trader, the rub came in finding appropriate EN spec product for immediate shipment to Rotterdam.
Around 20,000 cu m were said to be on their way to Europe over the coming few weeks, according to sources, but one source said that amount of imports was "not enough".
"You need someone to bring in around 30,000 cu m/month for five months, otherwise the market will stay backwardated," he said, with the caveat that this was the case if one of Europe's largest producers continued to have problems.
The European ethanol market has experienced a myriad of supply complications over 2015; the UK's second-largest ethanol facility paused production in February on the back of difficult market conditions.
An explosion at a Tereos-owned plant in the Czech Republic is likely to see production suspended for around six months while rebuilding work proceeds, according to sources.
Along with this, a number of other European plants were heard to be struggling with production after returning from maintenance or with financial issues.
Market sources have questioned whether the Spanish giant Abengoa is producing at anything close to full capacity after signalling in its 2015 quarterly results that it was about to embark on a major restructuring.
Share prices, as listed on the Madrid stock exchange, collapsed in the wake, plunging from the peak of Eur3.52 in April to a low of Eur0.70, according to the Abengoa website.
In August ratings agency Moody's said it was putting the company on review for a potential downgrade; by November, the company was still in review.
The company operates the largest ethanol production plant in Europe -- Europoort's 125 million gallon (3 million barrel) ethanol facility, but operates a further 209 million gallons of capacity across four other locations in Spain and France.
Against that backdrop, supply is further complicated by low water levels along inland waterways, making it difficult to move corn, wheat or sugar into facilities, or finished ethanol out of production locations.
For Europe's pricing environment to change, one source said there would need to be an answer to domestic supply issues and an influx of imports. "We survived this summer with Abengoa producing, but 20,000 cu m of imports is not enough," he said.
