London — The T2 ethanol FOB Rotterdam price Monday registered its biggest daily fall since the beginning of April, plummeting Eur23.50/cu m to a near three-month low of Eur554/cu m ($636/cu m), amid a risk-off attitude from buyers due to volatile currency and contagion from global financial markets, as well as signs of better than expected selling interest for September product.
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Register NowThe assessment was last lower on June 5, at Eur538.50/cu m, while the last greater daily fall was on April 9, when it dropped Eur23.75/cu m. Both physical and paper markets were sharply lower from the open, as plunging financial and commodities markets and a surging euro fed through to the European ethanol market.
However, the level of the fall of the physical price, particularly relative to nearby months on the paper market, was unexpected, said market sources.
The August monthly average is set for a 22-month high, after a lack of prompt availability throughout the month left end-users scrambling for product. That strength had been widely predicted to continue into the first half of September.
"It's very strange what happened, maybe out of panic, [there are] a lot of surprised people today," said one source.
September and October paper swaps were assessed Eur14/cu m and Eur13/cu m to Eur546/cu m and Eur512/cu m, respectively, also close to three-month lows for first- and second-month contracts. The move lower on paper markets roughly tracked weaker front-month Euronext Milling Wheat futures.
The move on both physical and paper markets was at least partially offset by a 2.4% day-on-day increase in the euro:dollar exchange rate however, to 1.1617 at the Platts 16:30 London close.
The stronger currency left the FOB Rotterdam price just $11.53/cu m lower, at $643.58/cu m. This also supported the ethanol premium over Eurobob gasoline to an only slightly lower day-on-day value of $264.38/cu m.
Some were predicting a rebound in the ethanol price, as financial market-related anxieties subside and fundamentals come to the fore again.
"Yesterday was a macro-influenced day, creating some panic that contaminated every single market - expect some sort of recovery today," said a second source.
Ongoing depleted inventories after the August dry-spell and talk of producer maintenance periods have been cited as the main reasons for the prompt strength to roll forward into the new month.
The relative weakness of the cash market could be explained by better than anticipated September availability though, added the first source, after sharply lower selling interest emerged during the Platts MOC process Monday.
"Stocks are always a mystery," the source said. "There are offers in the market for September. I would not say the market is flooded with them, but a decent number."
--Sean Bartlett, sean.bartlett@platts.com
--Edited by Maurice Geller, maurice.geller@platts.com
Similar stories appear in Biofuelscan. See more information at http://www.platts.com/Products/biofuelscan