U.S. ethanol makers lose money as Ike cuts demand

NEW YORK (Reuters) - Average U.S. ethanol makers were losing money this week on soft prices for the alternative motor fuel after Hurricane Ike and on high prices for corn, analysts said.

U.S. distillers were losing a few cents per gallon on average for the week ending Wednesday, analysts said. Earlier in the month, they were making a slim profits on higher ethanol prices.

"It's a demand issue, which happens with hurricanes. Nobody is buying ethanol with refineries out and nobody importing anything into the Gulf," said Cory Garcia, a researcher at Raymond James & Associates in Houston. The Department of Energy said on Thursday that nine oil refineries with a total capacity of more than 2 million barrels per day were operating at reduced levels after Hurricane Ike.

Rick Kment, an analyst at DTN in Nebraska, said previously that margins should range from positive 25 cents to negative 25 cents per gallon for the next six to 12 months as new ethanol markets form in the U.S. Southeast and as the relatively new industry tackles shipping constraints.

U.S. ethanol capacity has shot up 60 percent since last year to nearly 11 billion gallons per year, which could keep a lid on margins until the transportation bottlenecks are eased.

Volatile corn prices amid the supply overhang have stung some producers. Shares of ethanol makers Aventine Renewable Energy Holdings Inc and VeraSun Energy Corp took a beating this week as they wrestled with unpredictable corn prices and the credit crunch.

December corn futures on the Chicago Board of Trade closed at about $5.54 a bushel on Wednesday, up about 22 cents, after the U.S. government bailed out insurer AIG.

Ethanol prices in the Midwest were $2.20 a gallon, down about 15 cents from earlier in the month.

Providing some relief, prices for natural gas, which fires most distilleries, have fallen on stronger U.S. supplies. Average cash natural gas prices in the Midwestern United States were $3.82 per million British thermal units, down about $1.55 from earlier in the month.

(Reporting by Timothy Gardner; Editing by Marguerita Choy))