Viewpoint: EU ethanol prices likely to rise in 2024

European ethanol prices are likely to bounce back in early 2024, after an influx of imports and lower overall demand weighed on fob Amsterdam-Rotterdam-Antwerp (ARA) spot values in the second half of 2023.

A measured rise in European spot prices in September prompted an increase in booking of ethanol imports from outside the EU, with large quantities forecast to arrive in ARA in December, market participants said. But there are no large cargoes scheduled to arrive beyond February, according to market participants. This would cause prices to increase in a well-balanced domestic market free of the additional pressure of ex-EU supply.

Ex-EU imports of undenatured ethanol — required for road fuel blending in Europe — had actually fallen from the start of the year through to the end of the third quarter, to about 811,000t from around 943,000t in the same period in 2022, according to provisional GTT data. The overall decline was largely attributed to lower ethanol prices, albeit at an average above the current going rate. The fob ARA range spot price averaged around €793/m³ in January-September, compared with €1,096/m³ during the same period in 2022. After rising towards €900/m³ by the start of November, the price has now dropped below €600/m³.

Import surveillance

The European Commission said in September that it implemented retroactive surveillance measures on imports of ethanol. Producers welcomed this decision, and ePure told Argus the measure could track any trade developments that potentially arise from unfair competition.

The decision followed a surge in EU imports of ethanol since the start of the decade. Fuel ethanol imports were up by 45pc year on year in 2022, EU customs data shows. The commission said the EU market is attractive to exporting countries because its prices are around 15pc more than those in Brazil and the US.

Supporting demand, and hence spot values, Poland will introduce an E10 fuel obligation in 2024, replacing E5. Polish commodity trader Unimot said it expects the country's ethanol consumption to surge by around 200,000 t/yr, or about 50pc. Based on refinery ownership in Poland and the Czech Republic, the latter country may follow suit.

Price dynamics

The Argus ethanol price assessment peaked for 2023 at €1,000/m³ ($1,077/m³) on 31 March. This might have been linked to closed arbitrage opportunities and increased demand because of seasonality and the rollout of E10 gasoline in Austria, Norway and Ireland on 1 April.

But the lower prices overall in 2023 have weighed on values for ethanol with premium greenhouse gas (GHG) savings, and their differential to product from the same crop-based feedstock but with lower GHG savings has thinned. The differential was around €47/m³ in the first quarter of 2023, compared with around €25/m³ in December 2022. There was lower liquidity as well, driven by diminished renewable fuel ticket prices in key European markets. But trade is likely to pick up in 2024, with the start of a new compliance year.

Low tickets prices have also kept a lid on demand for alternative waste-based gasoline blendstock biomethanol. In this case, market participants expect liquidity to remain subdued.

The commission's proposal to exclude automatic certification of biomethane and biomethane-based fuels, such as biomethanol, if relying on gas that has been transported through grids outside the EU, is slowing negotiations for 2024 imports of biomethanol of US origin, participants said.

By Evelina Lungu