Uncertainty over implementation of the European Union's Renewable Energy Directive is hindering liquidity in the ethanol market, as market participants are cautious of taking large positions or are withdrawing from the market completely, trading sources said Thursday.
"Liquidity is very thin, you don't see [many] deals outside the Platts MOC," said one trader, referring to the Platts Market on Close assessment process.
"Market participants are not certain which sustainability clause they have to fulfill and don't want to expose themselves. We are not in the ethanol market at the moment, and we will return in January next year," the trader added.
The Renewable Energy Directive, which comes into force on December 5, 2010, establishes a set of sustainability criteria that biofuels -- both produced in the EU and imported -- will have to meet.
However, there is ongoing uncertainty over how the rules will be introduced into national legislation in the 27 member states.
"It is not clear yet which product you can supply to different countries, and you don't want to be stuck with non-compliant product," said the trader.
As a result, trading volumes in the European ethanol market have dwindled, with many trading sources expecting a pick-up in liquidity early next year when the situation is clearer.
"It seems to be little incentive for anyone right now to take any sort of long position; it's very hard to get done anything right now," said a source.
T1 (duty unpaid) ethanol FOB Rotterdam was assessed at $674.75/cubic meter Wednesday, largely unchanged from Tuesday's level and $4.25/mt down from Monday.
T2 (duty paid) ethanol FOB Rotterdam, was assessed at Eur606.25/cu m ($820.37/cu m), largely unchanged form Tuesday and Eur2.75/cu m down from Monday.
"Liquidity is very thin, you don't see [many] deals outside the Platts MOC," said one trader, referring to the Platts Market on Close assessment process.
"Market participants are not certain which sustainability clause they have to fulfill and don't want to expose themselves. We are not in the ethanol market at the moment, and we will return in January next year," the trader added.
The Renewable Energy Directive, which comes into force on December 5, 2010, establishes a set of sustainability criteria that biofuels -- both produced in the EU and imported -- will have to meet.
However, there is ongoing uncertainty over how the rules will be introduced into national legislation in the 27 member states.
"It is not clear yet which product you can supply to different countries, and you don't want to be stuck with non-compliant product," said the trader.
As a result, trading volumes in the European ethanol market have dwindled, with many trading sources expecting a pick-up in liquidity early next year when the situation is clearer.
"It seems to be little incentive for anyone right now to take any sort of long position; it's very hard to get done anything right now," said a source.
T1 (duty unpaid) ethanol FOB Rotterdam was assessed at $674.75/cubic meter Wednesday, largely unchanged from Tuesday's level and $4.25/mt down from Monday.
T2 (duty paid) ethanol FOB Rotterdam, was assessed at Eur606.25/cu m ($820.37/cu m), largely unchanged form Tuesday and Eur2.75/cu m down from Monday.
