COMMODITIES 2025: European ethanol faces feedstock challenges, US import uncertainties

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The impact of the poor corn harvest in Southeast and other parts of Europe is likely to persist in 2025 but could potentially be offset by imports, while market participants expect higher volumes of waste-based ethanol in 2025 as some producers classify bad corn as waste.

Market players expect high volumes of US imports, but there are risks of delays or lower than expected volumes due to certification issues and uncertainties around US tax credits.

Poor 2024 harvest extends impact on ethanol

Extreme weather conditions created significant challenges for Europe's corn harvest in 2024. In the third and fourth quarters, European ethanol market participants reported problems accessing corn feedstock.

A producer expected the corn feedstock difficulties to remain in 2025 and added that feedstock prices will continue to be high in 2025 compared with US corn.

In Hungary, crop quality was an additional concern as extended periods of elevated temperatures led to toxin contamination.

"Between Austria and Romania ... [the corn] has a lot of disease," another producer said. "It's very hard to find stable corn with favorable NUTS02 values and we don't see the crop situation improving in 2025.

"If we have a limited amount of corn, it means it's going to be prioritized for food."

Another source said "bad" corn in Hungary was being used to produce waste-based double-counting ethanol amid reports of an increase of second-generation ethanol on the market, which might continue in 2025.

The US Department of Agriculture trimmed corn production estimates for the European Union for the marketing year 2024-25 (July-June) in its latest World Agricultural Supply and Demand report released Dec. 10.

The EU corn production forecast was 58 million mt in MY 2024-25, lower from 58.8 million mt in November.

"EU corn production is down, reflecting reductions for Italy, Romania, Croatia and Austria that are partially offset by increases for Poland, Spain and France," the USDA said.

Amid reduced production, EU corn imports are forecast to increase by 500,000 mt month on month to 19.5 million mt.

"Europe is already importing US corn at this moment, so there will be some US corn in 2025," the first producer said.

Market keeps eye on US imports

Market participants expect record high US imports to flow into the Amsterdam-Rotterdam-Antwerp region, with an expectation that prices of T2 ethanol will be pressured in 2025 as a result. US volumes are seen as having the biggest impact on the European market.

As T2 ethanol prices rebound in ARA and while European producers grapple with high feedstock costs, "the arbitrage at this moment is at breakeven or almost open to the US," a producer said.

Platts, part of S&P Global Commodity Insights, assessed T2 ethanol FOB Rotterdam at Eur663.75/cu m Dec. 20, up 20.7% from the same period last year, though the US Chicago benchmark price also sits about 4% higher on the year.

"Production capacity and demand will be organically higher, and Europe is having some production problems, so the US could cover this gap that Europe needs," the same source said.

According to S&P Global Commodity Insights analysts, "overall import volumes will go up in 2025, but the poor crops in Southeast Europe are only a minor factor. It is mostly healthy demand for fuel which is driving this."

Fuel ethanol consumption in Europe in 2025 is projected at 9.059 million cubic meters, up 411,000 cubic meters from 2024, Commodity Insights data released in November showed.

"It seems like a lot of market participants in the US are struggling to get producers onboarded for the ISCC certification because of issues around feedstock quality and certification," a US trader said, as difficulties obtaining ISCC certification may constrain US exports to Europe.

Commodity Insights analysts forecast that the US will have a 25% market share of overall ethanol, both fuel and non-fuel, imports into Europe. The UK is anticipated to account for 15% of imports market share provided feedstock value chains are certified on time, while Brazil and Pakistan are forecast at 10% and 10%-15%, respectively, if the Generalized Scheme of Preferences Plus duty-exemption stays in place for the latter. Canada will account for 8%-9%, and the rest are forecast to come from Central and Latin America, the analysts said.

"When the UK plants are running, they have to bring some stuff into Rotterdam," the second producer said. "And the amount they bring into Rotterdam pressures down the Platts price."