Viewpoint: EU ethanol market to remain tight in 2022
European ethanol spot prices will remain at a steep premium to Eurobob oxy grade gasoline in 2022 amid continued tight supply and rising consumption of higher ethanol blends in Germany, France and the UK.
The Argus T2 prompt physical assessment for 50-60pc greenhouse gas (GHG) savings ethanol has hit records several times in the Amsterdam-Rotterdam-Antwerp (ARA) region since the end of September, albeit with some respite more recently. This highlights a broader outlook of demand outpacing supply. The assessment averaged €1,304.50/m³ in November — peaking at €1,505/m³ — far above the average of €652/m³ during the same month of 2020 as fuel suppliers struggled to source product.
Record prices on the Dutch TTF gas market have led to high operational costs at key ethanol plants and this, along with elevated feedstock costs, may force producers to cut production in 2022.
At the same time, the roll out of E10 gasoline — a blend that contains up to 10pc ethanol content — as the standard gasoline grade in the UK, the third-largest market in Europe, has increased demand. E5 is now only available as a protection grade at UK filling stations, encouraging significant uptake of the higher ethanol blend. Larger uptake of E10 in Germany and E85 — a gasoline blend that contains up to 85pc ethanol content used in flexi-fuel vehicles — in France has driven ethanol demand in Europe's two other largest markets. Meanwhile, Sweden introduced E10 in August, adding to demand.
The restart of UK producer Vivergo's 330,000 t/yr ethanol plant in Hull, northeast England, made possible by the introduction and rapid uptake of E10, is scheduled for the first quarter of 2022 and will help to ease supply tightness. But the plant, which has been mothballed since September 2018, will not return to full capacity immediately after its restart.
France's ethanol blend rate was above 7.8pc in October — an all-time high — after hitting 7.6pc in September. Prior to that, it had accounted for a 7.45-7.55pc share since September 2020. E10 took a 53pc share of French gasoline demand in October, while E85 accounted for a 4.3pc share, both records. German ethanol consumption hit a multi-year high in August, again because of stronger demand for E10. An increased discount of E10 to E5 in Germany, which was the first EU country to introduce the higher blend, has prompted drivers to opt for E10 after uptake was laboured by driver concerns about damaging vehicle engines.
In 2022 there will be higher biofuel blending mandates in the three major EU markets, with uptake of gasoline blends with a higher share of ethanol content likely to rise further. More suppliers will opt to meet a greater share of their obligations through ethanol blending because of elevated prices for biodiesel.
Europe is typically a net importer of ethanol, with arrivals from outside the EU most regularly from North and South America. This sort of external sourcing will be needed to make up a shortfall in regional supply. Imports of undenatured ethanol — typically used for road fuel blending — from outside the EU have fallen in 2021, to 63,000 t/month in the January-November period from 68,000 t/month in all of 2020, according to Eurostat data. This has further exacerbated the tight supply situation and has helped push prices to new highs.
The economics of bringing ethanol into the EU from the US and Brazil remain workable with prompt prices as high as they are. But large imports from Brazil are unlikely, as the majority of ethanol produced there is used domestically and extreme weather conditions in 2021 look set to cut Brazil's centre-south 2021-22 ethanol output by 8.7pc from the prior season, according to industry association Unica.
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Canada furthers investment in GHG reductions
Canada furthers investment in GHG reductions
Houston, 18 April (Argus) — The Canadian government plans to have C$93bn ($67.5bn) in federal incentives up and running by the end of the year to spur developments in clean energy technology, hydrogen production, carbon capture utilization and storage (CCUS) along with a new tax credit for electric vehicle (EV) supply chains. The Canada Department of Finance, in its 2024 budget released on 16 April, said it expects to have the first planned investment tax credits (ITCs), for CCUS and renewable energy investments, in law before 1 June. The ITCs would be available for investments made generally within or before 2023 depending on the credit. The anticipated clean hydrogen ITC is also moving forward. It could provide 15-40pc of related eligible costs, with projects that produce the cleanest hydrogen set to receive the higher levels of support, along with other credits for equipment purchases and power-purchase agreements. The government is pursuing a new ITC for EV supply chains, meant to bolster in-country manufacturing and consumer adoption of EVs with a 10pc return on the cost of buildings used in vehicle assembly, battery production and related materials. The credit would build on the clean technology manufacturing ITC, which allows businesses to claim 30pc of the cost of new machinery and equipment. To bolster reductions in transportation-related greenhouse gas (GHG) emissions, the government will also direct up to C$500mn ($363mn) in funding from the country's low-carbon fuel standard to support domestic biofuel production . Transportation is the second largest source of GHG emissions for the country, at 28pc, or 188mn metric tonnes of CO2 equivalent, in 2021. But the province of Alberta expressed disappointment at the pace of development of ITC support that could help companies affected by the country's move away from fossil fuels. "There was nothing around ammonia or hydrogen, and no updates on the CCUS ITCs that would actually spur on investment," Alberta finance minister Nate Horner said. The incentives are intended to help Canada achieve a 40-45pc reduction in GHG emissions by 2030, relative to 2005 levels. This would require a reduction in GHG emissions to about 439mn t/yr, while Canada's emissions totaled 670mn in 2021, according to the government's most recent inventory. The budget also details additional plans for the Canada Growth Fund's carbon contracts for a difference, which help decarbonize hard-to-abate industries. The government plans to add off-the-shelf contracts to its current offering of bespoke one-off contracts tailored to a specific enterprise to broaden the reach and GHG reductions of the program. These contracts incentivize businesses to invest in emissions reducing program or technology, such as CCUS, through the government providing a financial backstop to a project developer. The government and developer establish a "strike price" that carbon allowances would need to reach for a return on the investment, with the government paying the difference if the market price fails to increase. CGF signed its first contract under this program last year , with Calgary-based carbon capture and sequestration company Entropy and has around $6bn remaining to issue agreements. To stretch this funding further, the Canadian government intends for Environment and Climate Change Canada to work with provincial and territorial carbon markets to improve performance and potentially send stronger price signals to spur decarbonization. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Korea’s Hyundai starts operations at biodiesel plant
Korea’s Hyundai starts operations at biodiesel plant
Singapore, 18 April (Argus) — South Korean refiner Hyundai Oilbank has started commercial operations at its 130,000 t/yr biodiesel plant at Daesan as of 17 April, according to a source from the company. The plant is currently being fed with palm oil fatty acid distillates (Pfad). Most of the produced biodiesel will likely be kept to meet domestic demand, said other South Korea-based market sources. Hyundai had been trialing feedstocks at the plant since last December, which include Pfad, used cooking oil (UCO) and soybean oil. It previously entered an agreement with food manufacturer Lotte Confectionery in 2022, which involved Lotte supplying UCO as feedstock to the plant. The refiner said earlier this year that it is also considering co-processing biofuels at its 520,000 b/d Daesan refinery. It has plans for another 500,000 t/yr plant that can produce renewable diesel, sustainable aviation fuel and bio-naphtha, initially scheduled to come on line in the middle of the decade. But a final investment decision has yet to be reached for this plant. By Sarah Giam Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Idemitsu books rare US Gulf-Vancouver HVO cargo
Idemitsu books rare US Gulf-Vancouver HVO cargo
New York, 17 April (Argus) — Japanese oil company Idemitsu provisionally hired a medium range (MR) tanker to carry hydrotreated vegetable oil (HVO) from the US Gulf coast to Vancouver on 16 April, a sign of the growing HVO trade from the region into west coast North America. Idemitsu put the Stolt Sisto MR on subjects for a US Gulf coast-Vancouver voyage from 20-25 April at $2.35mn lumpsum. The fixture may be part of an agreement under which Vertex Energy supplies Idemitsu's California-based subsidiary, Idemitsu Apollo, with all of its renewable diesel production from its plant in Mobile, Alabama. The plant's exports are targeting "growing regional markets in the western United States and Canada", according to Vertex. High freight costs for US domestic shipments because of the Jones Act may be encouraging Idemitsu to focus on the Canadian market. In comparison, freight for a US-flagged MR on a New Orleans-Los Angeles voyage was equivalent to $4.34mn, nearly double the cost of a voyage to more distant Vancouver. "I think [demand from Vancouver] will keep expanding with the subsidies/grants," a shipbroker said. "There is not much production in Vancouver, just Parkland [refinery]." Canadian oil company Suncor typically books one MR vessel a month to carry HVO from the US Gulf coast to Vancouver, with two charters in October 2023 standing out as a particularly active month for the trade, according to ship fixtures compiled by Argus . But Idemitsu has been "jumping in on the action" in recent months, according to the shipbroker, provisionally hiring at least one MR tanker on the spot market in January and February before yesterday's deal. Vancouver buyers are also getting HVO from Asia-Pacific suppliers, and countries like South Korea could become increasingly competitive in the renewable trade overall as they ramp up their sustainable aviation fuel (SAF) and HVO production in the coming years. Vancouver imported around 29,500 b/d of HVO in January 2024, including 16,612 b/d from the US, 7,548 b/d from South Korea, and 5,351 b/d from Taiwan, according to Kpler data. By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Singapore's MPA, IEA unite on maritime decarbonisation
Singapore's MPA, IEA unite on maritime decarbonisation
Singapore, 17 April (Argus) — The Maritime and Port Authority of Singapore (MPA) and the IEA have signed an initial deal to push the transition to zero and near zero emission fuels, while working on technology as well as digitalisation to meet the maritime decarbonisation agenda. The agreement, signed by MPA chief executive Teo Eng Dih and IEA executive director Faith Birol, was announced at the Singapore Maritime Week 2024 (SMW) this week. "Greater international collaboration in maritime and energy industries is critical for international shipping to meet international decarbonisation goals," Teo said. "Shipping is one of the hardest sectors to decarbonise and we need to spur development and deployment of new technologies to slow and then reverse the rise in its emissions," said IEA chief economist Tim Gould. "This will require strong collaboration at a national and international level." Training programmes will be built to support the adoption of new fuels. There will also be partnerships made towards fuel-related projects and initiatives such as the International Maritime Organisation-Singapore NextGen project. The IEA plans to open its first regional co-operation centre in Singapore, which will be its first regional office outside of its headquarters in Paris, France. By Mahua Chakravarty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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