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FEATURE: European ETBE to find support from E10 gasoline uptake

The European ETBE market will find support from the upcoming E10 fuel uptake in Sweden and the UK as the availability of feedstock ethanol is expected to tighten, according to sources.

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Sweden will introduce E10 fuel, which is an eco-friendly blend of gasoline and 10% ethanol, from August 1 this year, with the UK expected to follow suit in September, according to the UK Department for Transport and Bioenergy International.

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The European ETBE FOB AR premium to MTBE remained stable both day on day and week on week at $261.65/mt on June 10, with little spot activity heard, S&P Global Platts data showed.

However, the switch to E10 will inevitably increase demand for ETBE feedstock ethanol, forcing both outright prices and the ETBE premium to MTBE higher.

"E10 in the UK will certainly have an impact on the spread of MTBE to ETBE, we should see an increase as demand for ethanol increases," a market source said June 9. "At the moment we can sell more [ETBE] than we can produce for Q3."

E10 is already active across much of Europe, with France currently the biggest European consumer of the fuel, with a 50% fuel consumption market share in the country.

Opportunity for bio-MTBE

Currently bio-MTBE, produced from second generation feedstock biomethanol, has struggled to gain traction in the European market due to high production costs associated with the fuel ether, according to sources.

Bio-MTBE and MTBE have the same technical characteristics. However, the biomethanol feedstock is classified as a waste product by the EU Renewable Energy Directive (RED) -- doubling its value for determining bioenergy content. This allows market participants a greater opportunity to meet EU specifications for biofuel use and CO2 reduction.

In comparison, ETBE is not eligible for double counting as the ethanol feedstock is predominately obtained from first-generation crop fermentation. With the increased uptake of E10 and the corresponding jump in ethanol demand, the price differential between ethanol and biomethanol is expected to widen, increasing the attractiveness of bio-MTBE as a gasoline blending component.

"Switching to bio-MTBE [from ETBE] will make more sense when the split between ethanol and biomethanol rises due to the uptake in E10 in the coming months," a trader said.

However, due to the fragmented application of RED II throughout EU member states, the uptake of bio-MTBE may be affected, sources said.

"In Sweden there is currently no incentive to use bio-MTBE as their mandate is GHG based," the same trader said.