Market and product

The EU ethanol front-month swap hit and two-month high and the second-month swap hit a three-month high amid continued tightness of supply in Rotterdam, which is expected to persist throughout the fourth quarter, sources said.

The front-month paper contract rose Eur18/cu m on the week to Eur558/cu m Tuesday, while the second-month contract rose Eur17/cu m week on week and was last assessed at Eur539/cu m.

Platts T2 ethanol assessment reached Eur588/cu m FOB Rotterdam Tuesday, up Eur11.50/cu m on the week, and moved up gradually over the last couple of days supported by low availability of volumes.

Physical price levels remain "surprisingly high" for this time of year, a source said. However, people are unlikely to be sitting on volumes at the moment, the source added.

The market expects tightness to persist during the next two months as ethanol volumes remain "impossible" to find for delivery during the fourth quarter, a source said, lending support to both the November and December paper contracts.

"I'm trying to get [volume] now for end-November and end-December and have no seller," a source said.

Furthermore, imported volumes have fallen, which doesn't help the situation in Europe. The arbitrage between Brazil and Europe market remains closed for now, sources said, with Brazilian ethanol producers reluctant to lock in volumes for export while the domestic market is bullish.

This sentiment was further supported by a recovering real and a depreciating euro value over the past two weeks.

European demand for ethanol remains strong, giving additional support to price levels, despite the market moving out of driving season.

"Demand has not been impacted in October and I don't expect seeing it in November," a source said.