Monday’s session saw a lull in trading in California’s LCFS market after the previous week’s activity which saw sustained price gains consolidated. Buyers on Monday proved reluctant to chase sellers any higher, with the best bid for fourth quarter transfer walked down to $76 against a dearth of firm offer indications. Value for PRIMA’s LCFS Index dipped $1 to $78.50.
LCFS prices into the upper-$70s/t still offer a sizeable draw for low carbon intensity biofuels which receive a relatively larger price premium from the deeper carbon cuts which they offer. Brazil has been the main source of ethanol imported to California between January and August this year, shipping 31.65mn litres of ethanol to Los Angeles through August, virtually all of the 31.88nmn litres shipped to the state in total. Imports of ethanol to Houston have climbed to 360.54mn litres so far this year, with Brazil again supplying virtually all of the material. August saw imports from Brazil peaking at 52.48mn litres, up more than 70% MoM.
Surging Brazilian domestic prices for ethanol have since closed the northwards arbitrage as Brazil’s domestic market responds to gasoline price hikes and concurrent hikes in demand for ethanol as a cheaper substitute. WASDE’s upgrade to US corn yields meanwhile has put downward pressure on the US ethanol market, already the source of the cheapest ethanol export barrel worldwide.