Vivergo, the UK's largest ethanol producer by capacity, said Wednesday that profitability at its 420,000 cubic meter/year (111 million gallon/year) plant at Hull in northeast England has been "adversely affected" by the lowest spot prices in nearly four years.
The statement was from Vivergo's part-owner, Associated British Foods, in its interim results for the 24 weeks ended March 1. Vivergo is also partly owned by oil major BP and chemicals maker Dupont.
Crush margins for feed wheat-based ethanol distilleries such as Vivergo have been the worst in April since the end of 2012, Platts calculations show.
The cost of wheat and corn, main ingredients for ethanol production in Northwest Europe, have shot up since late February as political tension in Ukraine boosted concerns of international supply disruptions.
At current market prices, converting enough feed wheat to make 1,000 cu m of ethanol would cost producers over Eur550/cu m ($759/cu m), according to an estimate based on the value of front-month Euronext futures.
But with the price of ethanol in Rotterdam hovering at the low Eur480s/cu m FOB, feed wheat-based ethanol makers are facing negative crush margins of around Eur70/cu m.
Crush margins flipped into red in November 2013, and have deteriorated from the minus Eur20-40/cu m range in December to the minus Eur50-70/cu m range in April, according to data compiled by Platts.
Vivergo began warning of a challenging European ethanol market in February, when it said in a trading update that a combination of excess supply and limited seasonal demand had sent prices tumbling.
Wholesale fuel-grade ethanol sold in the port of Rotterdam, where European prices are assessed, slipped to Eur442/cu m FOB on February 19, Platts data show, pressurizing margins.
That represents a 35% slump from a 2013 high of Eur682.25/cu m FOB hit on May 5 to the lowest level since May 4, 2010, according to Platts price assessments.
Ethanol prices have since recovered to a Tuesday close of Eur478.50/cu m FOB after touching a year-to-date high of Eur527/cu m FOB on March 24.
Vivergo also said Wednesday that production volumes "have increased steadily" at the Hull facility, contradicting data from the UK's Department for environment, food and rural affairs that shows a year-on-year decline in wheat usage for ethanol distilling.
In its latest statistical update of April 10, the government bureau said that wheat crushed for starch and ethanol production fell 8% year-on-year to 740.7 million mt in the 34 weeks since the start of the 2013-14 crop year in July,
Vivergo did not disclose detailed information on production and margins for its current financial year.
Vivergo and Ensus, in Teesside, are the only two large-scale ethanol producers in the UK. The Ensus facility has been offline since the start of March after resuming production in the autumn, according to industry sources.