Vivergo confirmed Tuesday the reopening of its ethanol plant in Hull, UK, which has been shut since November.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Talk of the restart emerged in early March, but until now had not been confirmed by the producer.
The decision for an extended shutdown had been taken due to unfavorable market conditions combined with policy uncertainty in the UK.
During this period, the producer said it conducted maintenance and upgrade work.
Since then, the UK passed an increased Renewable Transport Fuel Obligation (RTFO), mandating 7.25% biofuel blending starting this month from the previous 4.75%, and to increase to 9.75% by 2020.
Vivergo said in its statement this was seen as a positive step forward and it is hoped market conditions will improve in the UK as a result.
"We are pleased to see the RTFO pass through Parliament. This step, combined with the completion of maintenance work, has prompted us to recommence production after being offline over the winter period. However, there is much still to do if we are to sustain production and maintain this significant industry in the UK," said Mark Chesworth, Managing Director of Vivergo Fuels.
Vivergo stressed the importance of an E10 roll-out in the UK, a fuel blend containing 10% ethanol, and pressed for government action on it.
The producer highlighted the environmental benefits of such a move, but also the investment and employment benefits that a more robust biofuel policy framework would allow within the broader supply chain, including UK feed wheat and DDG industries.
The Vivergo plant has an annual production capacity of 420 million liters of ethanol and 500,000 mt of high protein feed.
The restart comes at a time of extremely low pricing for European ethanol, with the main ARA hub being heavily oversupplied.
The T2 price recently reached near-all-time lows and although it has since gently recovered, is not faced with a particularly bullish outlook, despite a contango forward structure, with Q2 and Q3 values considerably below previous years' levels.
The return online of the Vivergo capacity is likely already contributing to the the ARA supply pressures, combined with the influx of Latin American imports. But the latter should ease in coming months.
Market speculation is rife on whether this pricing environment will push another producer out of the market, as margins have been negative for some time. But much will also depend on demand expectations with the transition to the typically stronger summer season.