The boost to US ethanol prices from drought has prompted an "increasing
possibility" of Europe's top bioethanol plant reopening, despite soaring costs
of its feedstock, wheat, too, a leading analysis group said.
The UK's Ensus wheat ethanol plant "could come back online"
thanks to the improved economics for European Union manufacturers of the biofuel,
thanks to the dent to competition from US exports rendered by changes in market
pricing and import specifications, Czarnikow said.
The EU has now closed the loophole which allowed ethanol
exporters to cut import duties by some two-thirds by mixing the biofuel with
gasoline, so allowing it to be classed as a chemical product.
Ensus bosses cited competition with foreign supplies, which were
backed from the US by blending perks too until the end of December, as a major reason
behind their decision in May last year to mothball the plant.
Furthermore, the boost in prices of corn, the main feedstock
for US ethanol plants, to record highs amid Midwest drought means "import
margins into the EU are now closed".
"With imports currently priced out, the European market is
offering an opportunity for domestic ethanol producers to increase production,"
Czarnikow, the London-based sugar and ethanol consultancy, said.
"The largest factor that could potentially impact the
European market is the progress of the two ethanol plants in the UK," Ensus and
the nearby Vivergo plant.
Vivergo backed by the likes of BP and DuPont, which in July
delayed its opening date until the October-to-December quarter, citing "construction
and commissioning difficulties".
Czarnikow said that with the closure of the import tax
loophole, "and a return to relatively attractive operating margins, there is an
increasing possibility of the [Ensus] plant restarting, which could add an
additional 400m litres of supply on an annual basis from UK wheat".
'No formal decision'
However, Ensus itself on Friday maintained silence on plans
to reopen that it heralded in April when it began work to enable a restart to
occur more quickly.
"It seems like market conditions have improved. But Ensus
have not made a formal decision over when then can restart," a spokesman told
Prices of the group's own feedstock, wheat, of which Ensus
and Vivergo are both designed to consume more than 1m tonnes a year, have risen.
London feed wheat futures for November on Thursday set a
contract high of £197.05 a tonne, and up 29% from mid-June.
They stood at £196.55 per tonne on Friday, down 0.1% from
last night's close.
Czarnikow's comments came as it forecast a "positive"
medium-term outlook for European ethanol producers, thanks to the improved
economics for producers.
However, "there is much less certainty surrounding the
longer-term prospects for the European market", the group added, noting the increasing
preference of motorists for diesel, into which biofuels based on oilseeds are
blended, over the gasoline into which ethanol is mixed.
Furthermore, many countries have yet to allow mixtures of
ethanol in gasoline to be raised to 10%, and in those states which have allowed
such a blend, called E10, the biofuel has attracted negative publicity.
"Germany is a prime example, as motorists have been scared
by supposed risk to their vehicles of running on E10 as opposed to E5, exacerbated
by negative press coverage.
"Consequently, E10 is perhaps only 15-20% to total gasoline use,
despite major discounts at the pump."