China’s Ethanol Goals Could See Big Increase in Demand

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August 2, 2019

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by Sean Pratt (Western Producer) An analyst doesn’t think China will delay implementing its E10 policy until there is adequate domestic capacity because the policy is being driven by a desire to clean up the country’s air before hosting the 2022 Olympics.

Moving to a 10 percent gasoline blend by 2020 would require more than four billion gallons of ethanol annually

It appears as though China’s ethanol industry will fall woefully short of meeting the country’s looming E10 policy.

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“In my estimation, it would be one of the biggest opportunities right now that we have in ethanol on the global stage,” said Craig Willis, senior vice-president of global markets with Growth Energy, the leading U.S. biofuel trade organization.

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Willis said 48 percent of China’s gasoline demand is located on the coast of the country, which would make U.S. ethanol prices competitive with ethanol produced in northeastern China.

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Corn ethanol margins are poor but they would get a whole lot better with a new wave of demand out of China.

“We’ve heard some reports of U.S. ethanol already flowing to China through third countries,” he (Arlan Suderman, chief commodities economist with INTL FCStone) said.

Those countries are blending a small amount of domestically produced ethanol with imported U.S. ethanol and then re-exporting it to China.

U.S. ethanol can’t flow directly to China because it faces a stiff, 70 percent tariff in that country, which was partially the result of the ongoing trade war between the two countries.

Suderman is surprised the commodity hasn’t been placed on China’s tariff waiver list since there is such a glaring need for imported ethanol.

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Suderman thinks China could eliminate ethanol tariffs as part of a goodwill gesture in trade talks with the U.S.

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Willis said sales to China were booming before the trade spat. The U.S. shipped 52 million gallons of the fuel to China in a two-month span in early 2018.

“We were trending the right way but that has come to a complete standstill since March of 2018,” he said.

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Willis believes China could take up to one billion gallons of U.S. ethanol a year if the tariffs were lifted. To put that in perspective, the U.S. exported a total of 1.7 billion gallons of ethanol around the world in 2018. China took 52.9 million gallons that year. READ MORE

Forget Soybeans. ADM Signals Doom for Ethanol Without Trade Deal (Bloomberg)

Northwest Iowa Ethanol Plant Temporarily Suspends Production (KIWA Radio)

Ethanol Margins Take Toll–Archer Daniels Midland, Pacific Ethanol Hold Out Hope for Trade Deal With China (DTN Progressive Farmer)

Pacific Ethanol CEO says bankruptcy ‘not an attractive option’ (Sacramento Business Journal)

Oil Slides Most in More Than 4 Years on New Trump Tariff Threat (Bloomberg)

Report: China to fall short of E10 by 2020 goal (Ethanol Producer Magazine)

Excerpt from Bloomberg: In recent years, the biofuel industry expanded with an eye toward meeting burgeoning demand from China. The country has a goal to use more ethanol by 2020 in order to reduce smog. China’s ethanol program may mean it needs to import 2 billion to 3 billion gallons of the fuel, annually

For that reason, Luciano said it’s “a no-brainer” and a “win-win” for ethanol sales to be included in a trade deal.

Earlier this year, Luciano expressed optimism for a strong second half, citing expectations of a mid-year trade resolution. He tempered that outlook on Thursday, declining to estimate a time-line for a deal, although he did say he was confident one would be reached. READ MORE

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