European ethanol prices hit two-month high as Russia invades Ukraine

The S&P Global Platts European ethanol benchmark touched a two-month high at Eur1,060.25/cubic meter Feb. 24, up 14% from Feb. 23, as the Russian invasion of Ukraine spiked prices across commodity markets.

T2 FOB Rotterdam ethanol was assessed at Eur1,060.25/cu m Feb. 24, up Eur132.75, with front-end window dates assessed at Eur1,063.25/cu m above a bid at Eur1,063/cu m. It is the highest price since Dec. 23, when the market reached Eur1,060.75/cu m.

Russia launched a full-scale invasion of Ukraine Feb. 24, with military escalation and missile strikes in Ukraine closing ports and railways and causing blockages to vessel navigation.

Supply concerns led to commodity price spikes across the oil, natural gas, and agricultural sectors. ICE Brent crude oil futures crossed seven-year highs above $105/b because of the crisis.

The jump in the ethanol physical and paper markets was "mostly due to the soar of wheat and TTF — it's a crazy day," said one source Feb. 24. The Black Sea is a major producer of wheat, a key feedstock for ethanol production. The MATIF wheat March contract rose Eur28.75 to Eur316.50/mt by 1730 GMT. The Dutch TTF, the benchmark for Europe's natural gas market, saw its March contract jump 33.3% to Eur118.505/MWh by 1659 GMT, according to ICE data.

Ethanol production facilities across Europe rely on natural gas for operations. "Ukrainian feedstocks dominate EU producers both on the biodiesel and ethanol side — and everybody needs natural gas," said a second market participant.

T2 ethanol prices have been volatile prior to Feb. 24 with demand being supported as buyers looked to rebuild stocks ahead of the maintenance period in March and April. However, the open arbitrage for US and Brazilian ethanol into Europe and the reopening of the Vivergo facility in the UK may offer additional material that could help balance the tight European market, market participants have said prior to Feb. 24.