The lack of clarity on the level of denaturant accepted in fuel ethanol is leading to rejection of product delivered and non-performance in supply chains in the Northwest Europe ethanol market, according to sources.
"The supply chains are a mess. Some people are rejecting cargoes because of the level of hydrocarbons in it even though, contractually, the cargo meets the EN specs," a trader said in an interview Wednesday.
Denaturants are used in fuel ethanol in order to make the product unfit for drinking purposes. Denaturants normally contain hydrocarbons. MTBE, ETBE and gasoline are among common denaturants used in the fuel ethanol market.
According to the EN 15376 specifications, which regulate the quality of fuel ethanol in the European Union, denaturants, as required by European and national customs regulations, are permitted provided they do not cause harmful
side effects to vehicles and petroleum distribution systems.
The level of denaturants accepted, however, will vary according to country, with the Netherlands accepting up to 1% and Germany not accepting denaturants at all.
According to a source at Noble Clean Fuels, agribusiness company Cargill has rejected one delivery due to the level of hydrocarbons, or denaturants, in it. Noble's supplier was Finland's Neste Oil. Neste was also part of chain,having received the product from another trader, a source at the Finnish company confirmed.
A source at Cargill confirmed having rejected the cargo, but said the problem had already been resolved with a substitute delivery.
"The chains are really long and one rejection causes a problem for the whole industry," a market participant said.
A source at Morgan Stanley also said the company has been caught in the middle of one of the broken chains, while a trader at Vertcial said he has had discussion with customers on the issue.
"In our view, if you are meeting the national customs regulations and all the points of the EN spec, there should be no problem," a source at Vertical said in an interview Tuesday.
Traders seemed to be divided on what level of denaturant was acceptable.While some said ethanol should contain no denaturants at all, others said product should not be tested at all for hydrocarbons if it is classified as meeting the undenatured EN 15376 specifications.
The European Committee for Standardization, or CEN, which was responsible for the creation of the EN 15376 specifications, said Wednesday it did not plan to change the specification to determine the level of hydrocarbons that should be allowed.
"We've been through this before when we launched the specification. We chose not to determine the level of denaturants because each country had its own rules on whether denaturants were needed or not," Ortwin Costebole,secretary of the CEN technical committee on fuel standardization told Platts in a telephone interview Wednesday.
He said that if the product sold met the national customs law of the country in which it was being imported, as well as meeting the EN specifications, there should be no problems.
"What one needs to pay attention to is where they are taking the product to. If you import it in one specific country, you have to be careful that the level of denaturants meet the requirements of the next country you take it to," Costebole added.
The official also added that if a company needs for its own reasons to determine the level of denaturant in the product, it should specify it beforehand.
Sources also said that denatured ethanol, usually cheaper than undenatured, was being brought from the US and blended down in tanks to meet the Dutch customs specification, which considers ethanol denatured when the denaturant level reaches 1%.
Market sources said they were able to identify the blends due to storage company Vopak's tagging system.
A source at Vopak Thursday confirmed that it adds a tag saying "ethanol mixed with less than 1% gasoline" to material that entered the country as denatured and was later blended down.
"The product that was blended down will read with the CEN number 2207-1000 with less than 1% gasoline, while normal undenatured material will read just the CEN number 2207-1000," a Vopak source said in an interview.
CEN numbers will help identify quality of product according to the standards set by the European Committee for Standardization.
According to market participants, Vertical UK could be among of the companies to be blending denatured material down to undenatured specifications.
A source at Vertical, which is partially owned by Brazil's Cosan,declined to comment on the issue, but said the company was committed to delivering the EN specifications based on its contractual obligations.
"The supply chains are a mess. Some people are rejecting cargoes because of the level of hydrocarbons in it even though, contractually, the cargo meets the EN specs," a trader said in an interview Wednesday.
Denaturants are used in fuel ethanol in order to make the product unfit for drinking purposes. Denaturants normally contain hydrocarbons. MTBE, ETBE and gasoline are among common denaturants used in the fuel ethanol market.
According to the EN 15376 specifications, which regulate the quality of fuel ethanol in the European Union, denaturants, as required by European and national customs regulations, are permitted provided they do not cause harmful
side effects to vehicles and petroleum distribution systems.
The level of denaturants accepted, however, will vary according to country, with the Netherlands accepting up to 1% and Germany not accepting denaturants at all.
According to a source at Noble Clean Fuels, agribusiness company Cargill has rejected one delivery due to the level of hydrocarbons, or denaturants, in it. Noble's supplier was Finland's Neste Oil. Neste was also part of chain,having received the product from another trader, a source at the Finnish company confirmed.
A source at Cargill confirmed having rejected the cargo, but said the problem had already been resolved with a substitute delivery.
"The chains are really long and one rejection causes a problem for the whole industry," a market participant said.
A source at Morgan Stanley also said the company has been caught in the middle of one of the broken chains, while a trader at Vertcial said he has had discussion with customers on the issue.
"In our view, if you are meeting the national customs regulations and all the points of the EN spec, there should be no problem," a source at Vertical said in an interview Tuesday.
Traders seemed to be divided on what level of denaturant was acceptable.While some said ethanol should contain no denaturants at all, others said product should not be tested at all for hydrocarbons if it is classified as meeting the undenatured EN 15376 specifications.
The European Committee for Standardization, or CEN, which was responsible for the creation of the EN 15376 specifications, said Wednesday it did not plan to change the specification to determine the level of hydrocarbons that should be allowed.
"We've been through this before when we launched the specification. We chose not to determine the level of denaturants because each country had its own rules on whether denaturants were needed or not," Ortwin Costebole,secretary of the CEN technical committee on fuel standardization told Platts in a telephone interview Wednesday.
He said that if the product sold met the national customs law of the country in which it was being imported, as well as meeting the EN specifications, there should be no problems.
"What one needs to pay attention to is where they are taking the product to. If you import it in one specific country, you have to be careful that the level of denaturants meet the requirements of the next country you take it to," Costebole added.
The official also added that if a company needs for its own reasons to determine the level of denaturant in the product, it should specify it beforehand.
Sources also said that denatured ethanol, usually cheaper than undenatured, was being brought from the US and blended down in tanks to meet the Dutch customs specification, which considers ethanol denatured when the denaturant level reaches 1%.
Market sources said they were able to identify the blends due to storage company Vopak's tagging system.
A source at Vopak Thursday confirmed that it adds a tag saying "ethanol mixed with less than 1% gasoline" to material that entered the country as denatured and was later blended down.
"The product that was blended down will read with the CEN number 2207-1000 with less than 1% gasoline, while normal undenatured material will read just the CEN number 2207-1000," a Vopak source said in an interview.
CEN numbers will help identify quality of product according to the standards set by the European Committee for Standardization.
According to market participants, Vertical UK could be among of the companies to be blending denatured material down to undenatured specifications.
A source at Vertical, which is partially owned by Brazil's Cosan,declined to comment on the issue, but said the company was committed to delivering the EN specifications based on its contractual obligations.
