US likely to start exporting ethanol to Europe soon: traders

Houston (Platts)--19Sep2006

The US is likely to export ethanol to Europe in the near future amid
falling prices in the US and the prospect of continued oversupply, trading
sources said Tuesday.

"I expect it to happen within the next month," said one ethanol marketer.

Delivered prices to Rotterdam for ethanol are currently about $640/cubic
meter, or about $2.19/gal, outside duty, according to trading sources.

Freight on a 25,000 barrel shipment on a chemical tanker was put at about
19 cents/gal, with tanking and other costs at 5 cents/gal, netting back
to $1.95/gal in Houston on paper.

In the last two months US ethanol has fallen hard, dropping from
$3.25/gal to $1.95/gal in the Houston spot market.

Over the same period, finished conventional gasoline in the USGC has
dropped 78 cents/gal from about $2.34/gal to $1.56/gal.

Front month NYMEX RBOB has come off as well by about 74 cents/gal from
$2.3669/gal to $1.6266/gal.

Imports are helping to contribute to the fall in prices, with US Energy
Information Agency data showing ethanol imports rising from 681,000 barrels
in May to 1.576 million barrels June. Unofficial sources estimate the July
figure to be much higher, up to 2.5 million barrels.

One stumbling block to a potential arbitrage to Europe could be that
European specifications call for 99.8% purity product, while the typical US
standard is 99.4% pure.

Ethanol demand in Europe is mostly industrial, or for ETBE production,
and is said to be limited. "I don't think exports are going to make that much
difference in the short term for the US," said one trader.

Most import cargoes into the US have come from Brazil, but others have
come from Caribbean Basin countries like Jamaica and El Salvador, and at
least some from China and Pakistan, according to EIA statistics.

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