London (Platts)--29Aug2007

The Northwest European MTBE market will reduce in volume by around 30%
next year as more European member states institute biofuel legislation
favoring the use of products like ETBE or ethanol, industry sources said
Wednesday. 
     "In Europe I am afraid it will be down 30%," one source said. Another
source agreed saying that "if it is not by 30%, it will be by 25%." 
     Sources pointed to the biofuel mandate in Germany that will increase from
1.2% this year to 2% as of January 2008 as one major factor for the expected
rise in ETBE and/or ethanol use next year which will be to the detriment of
MTBE volumes. 
     Sources also pointed to, as yet unconfirmed, biofuel legislation that is
expected to come into force in other countries. Italy is expected by some to
institute around a 5% biofuel mandate while Belgium and France are expected to
mandate a 7% by volume biofuel usage. This could not be confirmed.    
     Austria confirmed in 2006 that it will mandate a 4.3% biofuel level from
October 1, 2007. 
     One source thought that the Northwest European MTBE market could
nevertheless resemble this year in terms of pricing as reduced demand will be
coupled with reduced production. 
     The source also thought European producers would
convert back to ETBE production. Another source said "the plan is to produce
ETBE," but would not be drawn on when a conversion would take place. Another
source said that it was too early to think about converting from MTBE to ETBE
however. 
     Further, US MTBE production is expected by many sources to be lower in
2008 than this year which may mean that there will be more South American
demand for Europe-produced MTBE. In addition, sources thought that there would
be larger demand for MTBE from Saudi Arabia next year but this could not
confirmed. These may help counter the ill-effects of reduced MTBE demand in
Northwest Europe, sources thought. 
     It remained unclear which biofuel will benefit the most from the
increases in mandatory biofuel requirements but one source thought that "ETBE
will definitely be short next year," and as a result people will have to
direct blend ethanol. "Direct blending logistics and infrastructure are coming
along fast," he added. 
--Oliver Laws, oliver_laws@platts.com