NWE T1 ethanol hits all-time amid thin activity, big E90 supplies
London (Platts)--4Mar2011/905 am EST/1405 GMT
Spot T1 ethanol in Northwest Europe hit a new historic high Thursday on a
higher deal reported for April lifting. The product was assessed by Platts at
$736/mt at market close, the highest level since records began in July 2008.
T1 is ethanol that incurs a Eur102/cubic meter ($142/cu m) or Eur192/cu m
duty when sold into the European Union, depending on the country. At present,
the United States is by far the biggest supplier of imported ethanol to the
Prices surged Thursday as VDS confirmed selling to BP 1,000 metric tons
of T1 ethanol for full April delivery at $730/cu m. Despite the lack of bids
and offers for T1 in March, paper indications at $735-755/cu m suggested the
front of the market was stronger.
T1 prices have rallied 8.75% since the start of the year, following sharp
increases in corn prices on the Chicago Board of Trade. Corn is the main
feedstock used for the production of ethanol in the US and it has a strong
correlation with ethanol values there.
Article continues below...
Request a free trial of: Oilgram News
Oilgram News brings fast-breaking global petroleum and gas news to your desktop every day. Our extensive global network of correspondents report on supply and demand trends, corporate news, government actions, exploration, technology, and much more.
CBOT front-month corn futures closed Thursday at $7.29/bushel, up
$1.09/bushel or 17.5% from January 3 after the US Department of Agriculture
slashed its 2010-11 forecast for national stocks to the lowest level in 15
Thursday's $730/cu m deal was considered "very low" by trading sources,
who pegged value to spot T1 at around $740-750/cu m.
"T1 paper for Q2 traded at $750/cu m this week, not to mention the
$740/cu m bid for physical product [for March] which was not hit [Wednesday],"
one trader said.
Another source said that based on parity with current US ethanol values,
T1 should be trading at around $780/cu m in Europe.
"The problem is that T1 is a very thin market now," one trader said,
alluding to competition from E90. "The E90 market is oversupplied, with most
players already covered for March and looking at April now, so there's no real
demand for T1," he said.
E90 is a blend of 10% gasoline and 90% ethanol which can be used as a
surrogate to T1 ethanol in the gasoline blending process. At present, E90
trades to a discount of around $50/cu m to T1 ethanol.
"So you still have people with [T1] product, people that can do stuff,
but everyone is looking at E90," the same traded argued.
Amid thin activity in 2011, industry participants were reluctant to
express any outlook for T1 prices, arguing that when liquidity is low "a
single trade can define the whole market."
"In 2011, I've have traded only 2,000 metric tons of T1," one trader said
Thursday. "That's nothing, absolutely nothing."
"While there's no demand, I don't think many companies have product to
offer either," another source pointed out, noting that short demand and tight
supply may help sustain prices.
The view expressed in the industry is that T1 will only be traded in the
spot market to cover active supply contracts. "Some people still have
contracts, I have contracts. So this market won't disappear so soon," one
In 2010, T1 ethanol hit its highest level on February 4, when it was
assessed at $716.50/cu m.
--Guilherme Kfouri, firstname.lastname@example.org