Ethanol - ETBE (Week Report)
ETHANOL – Both T1 and T2 markets made healthy gains this week, thanks to growing buying interest and tighter prompt markets. Interestingly, T1 moved into contango territory on Tuesday – with US$689 FOB Rdam booked for prompt Jan delivery, while US$690 traded for February tonnes. T1 prices seem to be heading back in the direction of the record highs of US$710-715 seen in December ‘09 and previously in September ’08. The closure of the Brazilian arbitrage, strong domestic Brazilian prices and surging replacement values are supporting a stronger T1 sector – despite Brazil’s blend reduction announced this week and also in spite of apparently constant ongoing discussions/offers of US material, an alternative source of T1, for the EU market. Some expect the first significant US volumes could come to Europe in February, but, as yet, little or no product has been confirmed booked to EU end-users. Poorer GHG ratings for US corn-based ethanol (compared to Brazilian cane and other origin ethanol) are cited as one of the key remaining potential impediments for European buyers. US producers are otherwise deemed able to produce to EU specs and meet other sustainability criteria.
