New duties on U.S. ethanol to boost EU output
* Lower U.S. imports should leave room for EU output rebound
* Weak gasoline demand due crisis to keep lid on output rise
* Higher Brazil imports likely but volumes still blur
* Hopes for margins recovery after surge in grain prices
By Sybille de La Hamaide and David Brough
PARIS/GENEVA, April 18 (Reuters) - New anti-dumping duties against the United States will reshape the European Union's ethanol biofuel sector, creating opportunities for European producers and imports from Latin America.
But some EU ethanol producers are still likely to struggle due to a rise in wheat prices, the region's weak demand for gasoline and its large stocks of the crop-based biofuel.
In late February, the European Union imposed an anti-dumping duty of 62.3 euros ($81.80) per tonne on imports of U.S. bioethanol intended to be used as fuel. LINK
"It's sure that the situation is better now than before the measures against the USA. There is less pressure, so new capacities in Europe will want to come onto the market, but gasoline demand is falling," said Sylvain Demoures, secretary general for French ethanol producers group SNPAA.
U.S. ethanol imports accounted for up to 20 percent of EU consumption in 2011, EU ethanol lobby ePure data showed. They jumped to 1.17 billion litres in 2011 from 102 million in 2009.
The new duty followed the closure last year of a tariff loophole that allowed ethanol/gasoline blends with less than 30 percent petrol to be classified as a chemical product, paying a much lower duty rate, rather than denatured ethanol.
Now U.S. ethanol accounts for below 5 percent of the EU ethanol market, according to data from analyst F.O. Licht.
Producers said the new tax was vital for the industry. Even so, a substantial level of stocks has put a lid on prices, and the final impact of the duty will depend on the euro/dollar exchange rate, they said.
On the demand side, the euro zone's slumping economies have severely weakened demand for petrol, which is crucial to the ethanol market given that most ethanol is blended into gasoline.
Partly limiting pressure on the ethanol market, however, some countries have lifted the percentages of ethanol required in gasoline blends, driving demand for E10 fuel, which contains up to 10 percent ethanol.
"I would say market conditions are still challenging at the moment ... People are just not driving the miles at the moment," said Rick Taylor, commercial director at UK biofuels producer Vivergo Fuels.
"You would hope to see ethanol prices creep up a bit into the summer, when you see more driving and therefore more demand," he added.
MARGINS TO IMPROVE
Earlier this month one of Britain's two major producers, Ensus, said it was in the process of temporarily shutting its biorefinery in northeast England, because the price of ethanol had not risen in line with feedstock costs.
In Europe, ethanol is made from wheat and sugar beets. Prices of sugar beets, which account for around 20 percent of EU production, have fallen in the past year. But wheat prices have gained over 15 percent over the past 12 months on worries about drought-hit U.S. crops.
Margins for European producers of grain-based ethanol should improve slightly in the coming months when new European crops are harvested. These are being sold in the forwards and futures markets at an average discount of 30 euros per tonne from this year's crop.
The use of cheap beet sugar as a feedstock will depend on its price relative to grains and on the size of the beet harvest as growers look to use surplus, out-of-quota sugars for ethanol production.
The protected EU sugar price ensures that quota production is used for sugar instead of ethanol. "The most profitable end-use of beet will be sugar," said Christoph Berg, managing director at F.O. Licht.
Roxana Ionici, senior biofuels analyst at data and information provider Platts, said at the Kingsman EU seminar in Geneva, that it was not possible to predict how much beet would be used as ethanol feedstock this year, because it would depend on relative prices of grains and beet.
Last year, beet sugar use grew sharply as the feedstock for German and French ethanol, favoured by the price differential.
Prospects for the EU beet crop for this year are still uncertain after a cold spell delayed sowings in much of Europe.
Analysts said the drop in U.S. biofuel imports also could pave the way for larger Latin American imports, although these also lost some competitiveness when the EU closed its tariff loophole last year.
Brazil's harvest of sugar cane, its main ethanol feedstock, is expected to jump to a record level in the 2013/2014. Top Brazilian sugar and ethanol producer Cosan expects to crush 10.3 percent more cane this season than a year earlier. Analysts disagree, however, on how much of the cane will be used for sugar versus ethanol.
The volumes of Brazil's ethanol exports to the EU will depend on its domestic demand, which is increasing as the government raises blending mandates, and on its sales to the United States over the next few months.
From September, the U.S. harvest begins of what is expected to be a record volume of corn, the main ethanol feedstock in the United States.
"The rise in the cane ethanol will not necessarily be absorbed by local demand and may be exported. The U.S. market will be first, but Europe comes next," Demoures said.
Brazilian ethanol shipments to the EU amounted to around 150 million litres in 2012, according to F.O. Licht. The major destinations were Spain and the Netherlands.
Ionici at Platts said Brazilian exports to the EU are likely to rise substantially this year and that shipments from countries such as Guatemala, Peru and Costa Rica also could increase. (Additional reporting by Nigel Hunt in London and Michael Hogan in Hamburg; editing by Jane Baird)
- Exclusive: Malaysia plane probe narrows on mid-air disintegration - source
- Radar showed missing plane may have turned back: Malaysia military
- Missing Malaysian jet may have disintegrated in mid-air: source |
- Malaysian plane presumed crashed; questions over false IDs |
- Merkel raps Putin as Russian forces tighten grip on Crimea |