NWE ethanol, ETBE prices rise, boosted by firm sugar futures

London (Platts)--30Jan2006

European fuel-grade ethanol and ETBE prices are expected to soar this
year, affected by firm ethanol raw material costs, as the price of sugar
continues to climb, major European producers say. 

     Although most ETBE producers are committed to long term contracts of a
minimum duration of six months, these will eventually run out and the higher
cost could be passed through to the ETBE market, one source said.

     Ethanol prices have continued to firm, bolstered by firm raw material and
strong ethanol demand from the Brazilian domestic market, sources said. This
continuing strength in ethanol pricing was expected to transfer into European
ETBE prices. 

     Sugar prices in both the refined and raw markets on the New York Board of
Trade fell Monday to around 18.20 cts/lb ($401/mt) at 1900 London time,
prompted by fund profit-taking, according to a US-based trader.

     Despite the day's decline, sugar commodity markets have soared over the
past 2 weeks to all-time highs, with fund buying fueling the surge. Sugar
prices were near 19 cts/lb last week (around $423/mt). Much the same as the
energy markets over the past year, demand for fuel-grade ethanol, and refined
sugar in Brazil has attracted fund interest in the market. 

     Sources say that balance of sugar production in Brazil, the world's
largest producer, would be a key factor in the future direction of raw
material costs. The Brazilian government is due to make a key decision on
whether to divert more sugar production towards ethanol or sugar itself, where
profit margins are higher. At the moment, it is more profitable to divert to
sugar production, the US-based trader said. Nonetheless, the fuel-grade
ethanol and ETBE markets were under pressure.

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