America's New Ambassador To China Is A Boon To The Renewables Sector

by Tristan R. Brown (Seeking Alpha) President-elect Donald Trump nominated Iowa governor Terry Branstad to be America's ambassador to China last week. China's government was quick to praise the pick, having developed a strong relationship with Mr. Branstad thanks to a robust agricultural and renewable energy trade between China and Iowa. The news provides some optimism for a sector that has become increasingly wary of Mr. Trump's rhetoric about trade with China and willingness to challenge diplomatic protocols.

Among the deluge of analyses that have been written about President-elect Donald Trump's impacts on the markets, one angle that has been largely ignored is what a trade war with China would mean for the U.S. renewable energy sector. For instance, the growth rate of U.S. ethanol consumption has slowed in recent years as domestic drivers have largely been unwilling to utilize ethanol that has been blended with gasoline in excess of 10 vol% (the so-called "E10 blend wall").

Producers have become increasingly reliant on the international markets as a means of achieving continued growth, with countries such as China proving to be eager consumers of both corn ethanol and the pathway's byproducts (especially DDGS and corn oil).

Mr. Trump's threats to impose tariffs on Chinese goods and label the country a "currency manipulator" (it is guilty on the latter count of late, albeit for the opposite reason stated by Mr. Trump) are therefore of concern to ethanol producers in particular since it is unlikely that China would refrain from retaliating against U.S. products.

China has become America's largest source of DDGS exports, setting annual records every year since 2013 and equaling by volume the amount exported to the rest of the world combined. China has also become an important destination for U.S. ethanol, with the total volume in several months since early 2015 reaching roughly 33% of total ethanol exports .... READ MORE