European ethanol prices have risen by more than 10pc since the start of the US-Israel war with Iran, with a number of indirect effects pushing values to the highest in four months.
Last week, prices for 75pc GHG savings crop-based ethanol rose to €754/m³, up by €72/m³ from 27 February, the day before the US and Israel attacked Iran, and the highest since 11 November.
While the conflict has not directly affected ethanol supply, there has been consequential volatility and disruption through higher freight rates, limited arbitrage opportunities and increased production costs. The war looks likely to tighten supply in what was, already, a structurally short European ethanol market.
Arbitrage economics for suppliers in North and South America to export to Europe have closed because of higher specialised freight rates and domestic prices. The EU is heavily reliant on ethanol flows from the Americas, with the bloc's largest suppliers of undenatured ethanol in the fourth quarter 2025 being Peru with 43,101t, Brazil with 26,747t, Canada with 21,819t, and the US with 18,822t. The Americas represented 71pc, or 133,275t, of all EU imports that quarter.
Specialised freight has become more expensive since the war began beginning and it could be difficult to book vessels. The war has almost entirely halted ships from passing through the strait of Hormuz, which has mostly stopped shipments of diesel from the Mideast Gulf to Europe and prompted European buyers to turn to the US Gulf Coast for cargoes. Revenues from these have been high enough to keep most IMO2/3 'swing tonnage' tankers away from ethanol, biofuels, and petrochemicals cargoes, supporting specialised tanker rates.
Tanker availability in the Americas was already very tight, and strong revenues in the regional products freight market and high numbers of Contracts of Affreightment have left even fewer available specialised tankers for biofuels. Charterers have faced high competition in the spot market which has sent specialised tanker rates surging.
The higher price of bunker fuel has also pushed up shipowners' costs to move cargoes and further supported freight rates.
Ethanol prices in the US and Brazil have also risen, which has disincentivised exports. US ethanol prices rose between 4-13 March in line with gains in oil products and agricultural futures. In-tank transfers at Kinder-Morgan's Argo terminal and for Chicago Rule 11 railcars rallied by more than 6pc, to €436.77/m³ (189.2¢/USG) and €427.19/m³ (185¢/USG) respectively, per Argus assessments. Barge values at New York Harbor rose by 5.5pc to €449.13/m³ (194.50¢/USG).
Brazilian ethanol prices were already supported pre-war by reduced domestic supply, a result of the major producing centre-south region being in the December-March sugarcane off season, coinciding with historically low stocks. Brazil's domestic demand for ethanol could grow if state-controlled Petrobras adjusts domestic fuel prices higher then consumers will look to fill up their flex-fuel vehicles with more ethanol.
Argus' price for hydrous ethanol traded on an ex-mill basis in the state of Sao Paulo reached 3,805 reals/m³ (€632.80/m³or 280.1¢/USG) on 23 January, the highest since 24 January 2022. The price has since reversed some of the gains but it is still trading at levels last seen four years ago.
EU ethanol production margins fell at the start of the conflict. Between 2-4 March, margins for corn fell by €94.49/m³ to €187.22/m³ and for wheat they fell by €95.49/m³ to €181.20/m³, according to Argus calculations that exclude variable costs of yeasts, enzymes, chemicals and denaturants. In 2025, the average production margin was €197.58/m³ for corn and €198.50/m³ for wheat.
Market participants attributed the lower margins to higher prices for natural gas used in the production process. With the war closing off some global LNG supply, the natural gas has gone from 20pc of production costs to 30pc, according to Argus calculations. Prices for grains have also risen, with the EU's corn production down in recent seasons, and imports have become more expensive because of higher shipping costs.
