USES

Ethanol is a colourless, flammable liquid, with a characteristic odour and burning taste. It is miscible with water, ether, acetone, benzene and a range of organic products.

The major outlets for industrial ethanol are as a solvent and in chemical synthesis, and major end products include paints, pharmaceutical, cosmetic and cleaning products.

Ethanol is used as a chemical intermediate for ethyl acetate, ethyl acrylate, acetic acid, glycol ethers and ethylamines manufacturing, among other products. Beverage grade ethanol is an additive to food and beverages, and is used in both drinking alcohol and to mix ingredients.

A large outlet for ethanol is as a fuel extender and oxygenate additive to gasoline.

SUPPLY/DEMAND

Supply-demand challenges this year included a shift in capacity and feedstock balances following the first quota-free sugar harvest.

A 24% increase in the harvest compared to the average of the previous five years also resulted in higher volumes of ethanol of every kind, sources have said throughout 2018.

Impact on fuel ethanol prices has been most visible. It may be the composition of the 96% beverage market that has been most transformed in feedstock balance. One sugar-based source said around 70% of domestic traditional ethanol could now be produced from sugar.

Growth in volumes meant logistical shifts, with French producers expanding market share domestically and in countries like the UK, Nordic countries and Germany. But high wheat prices under current demand conditions may have contributed to Vivergo’s announcement in September that it would stop production without E10.

French fuel ethanol demand growth is a key pillar in this expansion. By August 2018 higher ethanol fuels SP95 and E10 enjoyed a 16.4% year-on-year increase in consumption, according to UFIP (Union française des industries pétrolières). This contrasts with Spain, Germany and the UK, where shared mandates can result in faster-growing biodiesel market shares.

Low Rhine levels have impacted producers and barge refinery supplies, providing opportunities for eastern European and French producers.

Export markets for traditional and fuel ethanol producers grew in the Middle East, African and Caribbean countries and even Venezuela. Imports of fuel ethanol for rectification and traditional material were stable, with locally produced material maintaining competitive strength.

Brexit preparations and the UK’s Vivergo plant closure will impact northern Europe trade routes.

PRICES

Traditional 96% beverage and 99% industrial ethanol prices have stayed fairly stable this year, inching down in some regions. Despite downward pressure, particularly for beverage 96% ethanol, rollovers have been noted so far for the fourth quarter. This is also due to competing price pressures of other feedstocks where costs have increased, including wheat and ethylene for synthetic ethanol production.

US fuel ethanol prices plus antidumping duties have increasingly capped fuel ethanol prices in Europe, though, sources have said.

TECHNOLOGY

There are two types of ethanol: fermented and synthetic.

Fermentation is based on starch- or sugar-based feedstocks such as sugar beets, molasses, corn or wheat. A small but increasing amount of ethanol is produced from nontraditional feedstocks such as waste products from the drinks, food and forestry industries.

There are two processes: wet milling and dry milling, the main difference being in the initial treatment of the grain and the feed co-products. Synthetic ethanol is based on the direct gas phase hydration of ethylene.

OUTLOOK

Uncertainty continues to be significant in the fuel ethanol market, although some players see a more bullish outlook. Fuel ethanol sources have said countries with combined gasoline and diesel mandates could see competition from biodiesel.

Regulatory mandate increases across Europe are still expected to increase ethanol consumption over the coming years. It is still unclear whether countries like the UK and the Netherlands will introduce E10 in the coming year.

The 96% beverage and 99% industrial markets could see ongoing price pressure without the sugar quota, given increasing production capacities and current low sugar prices.

Nevertheless, no significant volatility is expected, with wheat and ethylene feedstock pressures also buoying prices somewhat.