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4/4/2014



Rail News: Rail Industry Trends

Rail system congestion drove up ethanol spot prices in early 2014, EIA says


Ethanol spot prices have increased steadily since early February primarily because of logistical constraints involving railroads, which transport about 70 percent of ethanol produced in the nation, according to the U.S. Energy Information Administration (EIA).

Extremely cold winter temperatures led to rail congestion in and out of midwestern terminals that delayed shipments to other regions and caused significant ethanol stock draws, EIA officials said in a report released yesterday. Rail-car dwell times at BNSF Railway Co.'s Galesburg, Ill., terminal — which handles many ethanol cars from Iowa — nearly doubled in early 2014, reaching a peak of 60 hours in February, they said.

Although more than 70 percent of ethanol producers are equipped to load unit trains, only 35 percent of gasoline blending terminals are equipped to receive them, the report states. The average speed of manifest trains often used to deliver ethanol to gasoline blending terminals that can't accommodate unit trains over the past 12 months has decreased by 23 percent, from 22 mph to 17 mph.

Ethanol stocks were drawn down nationwide by nearly 2 million barrels from mid-February to mid-March, partially recovering to 15.9 million barrels on March 28 — more than 4 million barrels below typical March levels, EIA officials said. In the near term, prices might soon begin to level off.

"Ethanol futures prices suggest that market participants expect the recent price increase to be short-lived as both rail system congestion improves and ethanol producers respond to the strong incentive that higher ethanol prices provide," EIA officials said.



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