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T2 ethanol nears 14-month low as supply mounts, buying interest still low

London — European T2 ethanol was assessed at a near 14-month low Wednesday, with stocks in Rotterdam heard to be increasing, and expectations of further supply reaching the market in the coming days, leaving buyers in wait-and-see mode, sources told S&P Global Platts.

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T2 ethanol was assessed at Eur443/cu m FOB Rotterdam ($523.25/cu m) Wednesday, down Eur15/cu m over the course of the week.

With sugar deregulation on the European market coming into force, and the sugar campaign underway, the market had been backwardated into the winter months for much of the year, and appears to have finally realized that backwardation, with some market sources earlier in the year expecting the structure to roll from one month to the next.

Part of the increase in supply stemming from sugar-beet feedstock is already priced in, and volumes from this source have been arriving into the market since the end of September. However, the expectation is that the lion's share of supply will reach the market in November.

"The market is verging on oversupply but not enough to warrant such plummeting prices," said a source.

As a result of the waning prompt T2 ethanol price, production margins have narrowed considerably, with largely stable milling wheat prices in Europe, despite European corn exhibiting a gentle downturn.

"Once buyers return, the price will jump up," a source said, as market participants expect a sharp reversal in pricing once the price reaches a level sufficient enough to entice buyers back to the market.

--George Griffiths, george.griffiths@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com