The UK ethanol sector expects prices to fall because of the recent trade deal with the US, but participants are divided on the scale of the effect.
The trade deal has cut import duties on US ethanol to zero on higher volumes than recent import levels, raising the prospect of large amounts of US product crossing the Atlantic.
The UK was the second largest destination for US ethanol exports in 2024, taking more than 923mn l, or 13pc of all exports, according to US industry group Renewable Fuels Association. The UK imposed a duty of £16/hectolitre ($21/hectolitre) for undenatured ethanol and £8.50/hectolitre for denatured ethanol, which the trade deal will remove. Zero tariffs will be applied to up to 1.4bn l/yr.
European renewable ethanol association ePure told Argus the deal presents a "huge problem" for UK and EU ethanol producers, a view echoed by some UK market participants. But some active in the UK ethanol market have said that while they do not expect greater amounts of ethanol to arrive in the country, they do anticipate lower prices and lower domestic production.
The operators of the UK's two major ethanol-producing facilities, Vivergo and Cropenergies, said there will be zero tariffs on "the size of the UK's whole ethanol market", and said they may have to close. According to Argus data the total UK production capacity for wheat-based ethanol is over 736mn l/yr.
The National Farmers' Union expressed concern about the deal's effect on arable farmers, and said it is "working through what this means for the viability of the domestic bioethanol production."
Although a healthy share of the total import pool from the US is waste-based, the UK government is consulting on whether to continue classing the main waste feedstock imported from the US as eligible for double counting under its renewable transport fuel obligation (RTFO).
Staging post
UK producers may still seek to maximise imports from the US for onward export into the EU.
The current EU-UK Trade and Cooperation Agreement (TCA) allows for zero tariffs and quotas on all trade of UK and EU goods that comply with appropriate rules or origin.
But with this new deal, there is an increased chance of US ethanol entering the EU via the UK, Epure said.
"Under existing customs rules US ethanol can be mixed with UK ethanol and thus avoid an EU duty," it said.
This may include major proportion, which limits the share of non-originating materials to claim UK origin, or inward processing relief, which allows for imports to be processed without paying import duties or value added tax (VAT) before re-export.
Some market participants contested the extent to which UK-EU flows of ethanol with partial US origin might happen, suggesting the imported ethanol would need to undergo a significant chemical change to be classified as duty free, such as being used as feedstock for products including ethyl tert-butyl ether (ETBE).
EPure said the EU should be wary, and called for ethanol to be included in a final list of products subject to EU countermeasures, as it was in a recent proposal from the bloc currently under public consultation.
