(Reuters) – German bioethanol producer CropEnergies is suspending production at its British unit Ensus because of record low bioethanol prices and the strong British pound versus the euro.
CropEnergies, a unit of German sugar refiner Suedzucker , said on Wednesday it expected the temporary shutdown to lead to restructuring costs of up to 40 million euros ($46 million) for 2014/15, also impacting Suedzucker’s results.
Shares of Suedzucker were 1.5 percent lower and CropEnergies shares were down 8.8 percent in Frankfurt at 1006 GMT.
“This decision has been made due to the current difficult situation in the European bioethanol market which the dramatic drop of oil prices in the last few months has exacerbated,” CropEnergies said.
The production plant in northeast England, would be brought online again as soon as market conditions allowed, it said.
It said bioethanol prices had reached a record low of 417 euros per cubic metre, on a free-on-board basis at Rotterdam, on Jan. 15. Prices were around 470 euros a year ago.
Ensus, one of Europe’s largest bioethanol plants, has the capacity to annually produce 400,000 cubic metres of bioethanol and 350,000 tonnes of the animal feed byproduct known as Dried Distillers Grains with Solubles (DDGS).
At full production the plant can consume over 1 million tonnes of feed wheat annually as raw material.
The plant stoppage could free up more British animal feed wheat for export, traders said.
“British feed grain is currently in strong demand in the Middle East and Asia following the export restrictions imposed by Russia and Ukraine and I think the British will find a ready market for their wheat supplies,” one German grain trader said.
Traders said bioethanol prices had fallen partly because of the sluggish European economy and low crude oil prices.
“Some oil companies are believed to have transferred pretty large bioethanol supply positions into the market after Christmas as demand was not as large as they had expected,” one European trader said. “Cheaper bioethanol is also available from east Europe following large corn crops there which are used as feedstock.”
There is also heavy competition from biodiesel in countries such as Germany where oil companies have a choice between biodiesel and bioethanol to comply with compulsory blending requirements to meet environmental protection targets, he said.
($1 = 0.8776 euros) (Reporting by Georgina Prodhan and Ludwig Burger, additional reporting by Michael Hogan; Editing by Kirsti Knolle, Pravin Char and David Evans)