Ethanol prices in Europe look to be well supported in 2026, and demand for higher greenhouse gas (GHG) emissions saving product is expected to grow.
This comes as the EU's updated Renewable Energy Directive (RED III) is rolled out in more member states, and supply looks to be shortening in a market that has historically been well balanced.
The Netherlands will transition to a greenhouse gas (GHG) emissions-saving mandate under its transposition of RED III in January. This means an end to double counting of ethanol produced from advanced feedstocks toward national mandates.
Germany, another major European market, is also set to remove double counting for advanced biofuels.
This being the case, demand will rise for crop-based ethanol, a staple of gasoline blending in Europe, especially for material with higher GHG savings.
This has coalesced in increased interest in the Argus-assessed average 75pc GHG savings crop-based ethanol in recent weeks, with a first spot trade made on the Argus Open Markets (AOM) trade initiation platform on 16 December. Trading on these standards is the projected approach of obligated parties in some key markets as they seek to fulfil their new, higher GHG emissions savings mandates in the most economical way possible.
In the year to 1 December, Argus has assessed even higher GHG savings — minimum 90pc — crop-based ethanol at an average discount of just under €180/m³ to RED Netherlands waste-based ethanol. Since the launch of the Argus' RED Germany waste-based ethanol assessment in June, again to 1 December, the discount for high GHG savings crop-based ethanol has averaged just over €176/m³. These spreads may narrow as the projected market dynamics unfold.
Supply crunch
A supply gap has opened in Europe since the signing of the UK-US trade agreement in May.
EU imports of UK undenatured ethanol have since collapsed, down by around 56pc on the year in May-September according to Eurostat data.
The deal saw the UK remove all import tariffs on up to 1.4bn l/yr of US ethanol, which led directly to UK producer Vivergo shutting its 416mn l/yr Saltend plant in August.
The EU's imports of US undenatured ethanol are also down on the year, by nearly 13pc in May-September, based on Eurostat data, as US ethanol flows are diverted to the UK.
In the Netherlands, imports have been made permanently more expensive by the government ruling in October that only undenatured ethanol would be eligible for compliance under the national annual renewable energy obligation in transport.
This amendment to its EU RED III transposition package means that essentially all imports of fuel grade ethanol for use in the country will be subject to the maximum import tariff of €192/m³, and not the €102/m³ tariff for denatured ethanol.
These developments supported ethanol prices near two-year highs in October, and whether they stay elevated depends on imports arriving from other suppliers like the US or Brazil.
EU imports of undenatured ethanol from the UK and the US between May and September were down by 44pc, or 72,300t, on the same period in 2024. Stock levels in Amsterdam-Rotterdam-Antwerp (ARA) ports were low for much of the third and fourth quarters of 2025.
The US' production capacity of 52.4mn t/yr means it remains a likely candidate to fill the EU's supply gap, but this depends on demand in the UK and the prices buyers are willing to pay there. Alternatively, Brazil may be able to fill the void with production capacity of more than 78.1mn t/yr. The Mercosur-EU trade deal is likely to be signed soon and the terms would effectively open the arbitrage window permanently for ethanol producers in Brazil to send material to Europe. But implementation of the agreement could take several years.
