Ethanol

Ethanol Trading

Ethanol is a unique commodity, falling between the agricultural and energy markets.  Produced from grains, organic material and sugar, it is then used as an energy product, burned in engines as a clear colourless alcohol.  Imperium Commodity Search work closely with traders of both agricultural and energy products, covering a range of biofuel, renewable energy and ethanol trading houses, producers and end users. 

Imperium Commodity Search operate an in depth, research led recruitment model to offer an edge to both clients and candidates in the ethanol markets across key markets globally. 

What is Ethanol? 

At its simplest, Ethanol is a clear, colourless chemical compound that is more commonly referred to simply as ‘alcohol’.  Ethanol is a volatile and combustive compound that has psychoactive properties when consumed.  Production methods follow either a petrochemical path, via the hydration of ethylene, or an organic one, via the fermentation of sugars with yeast.  In more recent years, lots has been done to identify the possible uses of ethanol from lipids, such as algae, for use in shipping and aviation fuel.  

In commodities, ethanol is primarily seen as a fuel with an interesting past.  Ethanol first rose to prominence in the 1800’s as a fuel and then underwent a period of almost non-existence during prohibition in 1920’s.  In fact, Henry Ford produced the Model T, the first mass produced automobile, to run on Ethanol.  This was quickly a rather unused characteristic as the price of gasoline fell and prohibition all but ended ethanol as a fuel. 

The most common uses of ethanol are fuel, medical applications, antiseptics, solvents, feedstocks and as an additive to beverages and foods.  Fuel is by far the largest use of Ethanol in today’s markets and as nation states move towards long term commitments on renewable and environmentally friendly fuels, its use in this regard looks set to grow in the years and decades ahead.  

In its role in a fuel, ethanol is seldom used ‘neat’ and is usually blended with gasoline to create a clean burning and more environmentally friendly fuel.  In the US, E85 is the standard blend for ethanol burning automobiles which consists of 85% ethanol blended with 15% gasoline.   This blend increases the energy output of pure ethanol which is lower than that of gasoline, and also helps to balance price.  The distillation process of crude oil is cheaper than the end to end process of distilling grains through to finished ethanol or alcohol. 

The largest ethanol companies and market participants are Archer Daniels Midland (USA), Copersucar (Brazil), POET (USA) and Oderbrecht (Brazil)

How is Ethanol traded? 

Like most commodities, ethanol has an established derivatives market (futures and options) which settles contract at 29,000 gallon quantities.  This measure equates to around 1 freight car of Ethanol in the United States.  

In physical trading, ethanol has some large emerging market uses and is growing quickly across Asia and South America.  The production method differs between regions, with the United States primarily using corn to produce their ethanol output, and Brazil using sugar cane.  

In the physical trading world, ethanol is commonly shipped by railcar/freigh rail in the United States and is starting to see increased flow through pipelines in much the same way as oil products.  As ethanol demand increases, countries are looking towards more permanent large scale infrastructure to accommodate shipping and transportation needs.  

Back to Back Traders work within trading houses, purchasing ethanol from production facilities and selling to fuel retailers, oil and gas companies or heavy machinery users/factories etc.  Traders involved in ethanol can work at different stages of the production process, some selling sugar, corn and DDGS from agricultural producers into blenders that ferment the product to produce ethanol and some managing the trade between these producers and the end users/processors of raw ethanol.  Many of the customers for these traders are responsible for belding ethanol and gasoline to produce commonly used vehicle fuel (E85 – 85% ethanol and E10 – 10% ethanol)

Sourcing / Sales agents and traders work within large scale users of ethanol, either for neat fuel or to blend into end user product.  These traders sit on the purchase side and are responsible for negotiating both short and long term supply deals, as well as spot trades to source ethanol at a competitive price, maintaining margins. 

Ethanol Derivatives are traded on the CME (Chicago Mercentile Exchange) and the ICE (Intercontinental Exchange) in futures and options contracts.  Corporate traders often work within trading houses or large users of ethanol to hedge price risk of the physical market or to take physical delivery on long term futures contracts.  Ethanol is increasingly being traded as an investment product within funds and institutional trading houses/prop traders as well. 

Where is Ethanol traded? 

Ethanol has been a growth market since the 1970’s with renewed interest in the fuel source as environmental concerns grow.  The fermentation and production process has been improved over time and led to increased production.  Many emerging markets without large scale oil refineries or an over reliance upon foreign trade for fuels are looking to ethanol as a sustainable domestic fuel source.

The largest producers of ethanol are: 

  • USA
  • Brazil
  • European Union
  • China
  • Canada

What is the Salary for a Ethanol trader? 

Experienced ethanol traders can earn between 100-200,000USD per annum and supplement this with a commission/performance led bonus structure.  In recent years there has been a marked increase in the salary levels we have seen for new hires as companies have competed for talent in a growing market.  

Entry level positions are naturally skewed towards a bonus element as new traders build out their market and start to bring revenue into their company.  Increases year on year are common and salaries often scale to business levels/revenue streams.  We would usually expect to see salary levels between 50-70,000USD for inexperienced traders although this varies by state and country. 

Imperium Commodity Search – Headhunter and Recruitment Consultants to the global Ethanol trading markets 

Imperium Commodity Search have a strong network of both clients and candidates in the ethanol trading space and operate a flexible research led and extraction recruitment model to identify the best traders, operators and analysts in the market.  Our consultants have experience working between sugar and grain producers and refineries as well as energy sales/bio and ethanol trading desks. 

To discuss finding your next role within the ethanol trading, operations and sourcing markets, or to find out how Imperium Commodity Search can give your firm a competitive edge in a volatile market, then please call us now on +44 (0) 203 927 5090 or register online here and one of our Commodity Consultants will contact you ASAP.

View our current ethanol trading or operations jobs or contact one of our consultants to explore current careers / jobs in ethanol trading discuss your needs in more detail. 

To arrange a consultation with a consultant to discuss your hiring needs / growth plans and where we can assist click here or contact one of our consultants directly here for a confidential discussion.

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