The Hand Sanitizer Market: A Salvation for Beleaguered Ethanol Producers, or Not?

March 24, 2020

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by Jim Lane (Biofuels Digest) ... In response to the Coronavirus Disease 2019 (COVID-19) pandemic, the Alcohol and Tobacco Tax and Trade Bureau (TTB) created exemptions allowing certain alcohol fuel permit holders to sell ethanol (alcohol) for use in the production of hand sanitizers.

Consequently. Aemetis, Inc. said its 65 million gallon per year ethanol plant near Modesto, California has begun shipments of 200 proof alcohol for use in the production of hand sanitizer, which is in a significant shortage created by the worldwide spread of Coronavirus (COVID-19).

“Can’t hand sanitizer save the industry now?”

As an Argus media reporter asked at an emergency RFA online press conference on the coronavirus crisis, “why can’t the whole industry pivot to industrial ethanol production? Why can’t hand sanitizer save the industry now?”

The response from Randy Doyal, CEO, Al-Corn Clean Fuel, based in Minnesota was that there would be less vodka but more hand sanitizer coming in the next week to 10 days.

The good news

As Raymond James’ Pavel Molchanov observed this week, “Just as automakers converted their plants to supply tanks and fighter jets during World War II, and those same companies are now looking at supplying ventilators, many other enterprises amid the COVID-19 crisis are looking for creative ways to address the public health emergency. Here is one that, we admit, we would not ordinarily think about: producing hand sanitizer from corn ethanol.

“Aemetis, an early entrant into this market, points to prospective pricing of $70+ per gallon (yes, really). Amid oil prices at nearly 20-year lows, well below $30/Bbl, it goes without saying that ethanol prices are depressed: currently around $1.00/gallon. Selling into the hand sanitizer market can offer pricing that is 70x higher. Yes, you read that right. To be sure, the economics vary on a site-by-site basis, based on (among other things) proximity to hand sanitizer production facilities. Aemetis (AMTX), which produces ethanol in California, has the advantage of being located on the West Coast, and last week it became one of the first ethanol players to take advantage of the Treasury’s authorization. From our conversation with Aemetis, here is the economic proposition, in general terms… Retail stores are selling hand sanitizer at around $1.50/ oz. Of that, $0.50 goes to the retailer and distribution, $0.20 for packaging, and $0.20 for the compounder. That leaves $0.60 for the ethanol feedstock. With 128 ounces in a gallon, the implied selling price is upwards of $70/gallon.”

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Some market sizing

Hmm. Let’s quickly demolish the thought that this is anything but a small-scale opportunity.

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Now, sanitizer is around 1/3 alcohol — so consider the maximum market size to be around 30 million gallons.

That’s US ethanol production for about 17 hours.

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The following RFA members are among the ethanol companies that have provided high-grade ethanol for hand sanitizers and other cleaning products in recent weeks: Absolute Energy (St. Ansgar, IA); Chippewa Valley Ethanol Company (Benson, MN); Grain Processing Corp. (Muscatine, IA and Washington, IN); and Pacific Ethanol (Pekin, IL).

Donations in the offing

Some producers are simply donating ethanol to support the community.

Today, we hear that two Iowa Renewable Fuels Association members sent the first donated shipment of Iowa ethanol and glycerin to the state of Iowa to be used by Iowa Prison Industries for the production of hand sanitizer during the national shortage. The donation is made by Iowa ethanol producer Absolute Energy and Iowa biodiesel producer Western Iowa Energy. The Iowa Renewable Fuels Association (IRFA) worked with Iowa Prison Industries to secure the shipment of these products and other necessary ingredients. Templeton Rye is also providing distilled water for the project. The finished product will be distributed free of charge by the state of Iowa for priority use.

And DSM is donating too. They have produced 130,000 litres free of charge #desinfectiemiddel for Ministerie van Volksgezondheid, Welzijn en Sport it, which will distribute this to #ziekenhuizen and in the #zorginstellingen Netherlands. DSM added, “with this donation we help where we can in fighting #coronavirus it.” More on that story. READ MORE

IRFA MEMBERS DONATE ETHANOL AND GLYCERIN TO STATE OF IOWA FOR HAND SANITIZER PRODUCTION (Iowa Renewable Fuels Association)

Minnesota ethanol producer ramping up production of industrial alcohol used in sanitizers: A biofuels downturn in recent months has been exacerbated by the coronavirus shutdown. (Star Tribune)

Faltering ethanol refiners switch to hand sanitiser (Financial Times)

How biofuels enter the race against the coronavirus pandemic (EurActiv)

Ethanol producers help produce hand sanitizer to combat COVID-19 (Ethanol Producer Magazine)

IOWA AND NEBRASKA BIOFUEL PLANTS DONATE TO HAND SANITIZER PRODUCTION (Brownfield Ag News)

Minnesota ethanol producer ramping up production of industrial alcohol used in sanitizers (Star Tribune)

Amyris Launches Leading Hand Sanitizer and Receives Initial Positive Result for Vaccine Adjuvant (Biofuels Digest)

Ethanol plants seek rule changes to resupply hand sanitizer (Associated Press)

EPA suspends enforcement of environmental laws amid coronavirus (The Hill; includes VIDEO)

As renewable fuel demand collapses, Pacific Ethanol makes alcohol, hand sanitizer (Sacramento Business Journal)

Germany approves ethanol use in disinfectant production (Argus Media)

Editorial: With nation at war to beat coronavirus, FDA approval for ethanol-based hand sanitizer was wise decision (Daily Nonpareil)

Coronavirus Not Stopping Amyris: The Digest’s 2020 Multi-Slide Guide to Amyris’s Production Resilience (Biofuels Digest)

FDA Changes Boost Alcohol for Sanitizer From Ethanol Makers (Associated Press/New York Times)

Bioenergy delivers 7,000 liters of alcohol to the Meta Governorate and the Puerto López Mayor's Office (Federation National de Biocombustibles)

FDA allowing more ethanol plants to make sanitizer (Argus Media)

More ethanol plants help produce hand sanitizers (Ethanol Producer Magazine)

OPINION: Finding hope in dark times (Ethanol Producer Magazine/Renewable Fuels Association)

Swedish chemicals firm gets green light to produce hand sanitisers (Biofuels International)

WNY Energy is supplying ethanol to be made into sanitizer amid coronavirus pandemic (WIVB)

Distillers, lawmakers pressure FDA to revise hand sanitizer guidelines to permit excise tax relief (ABC News)

A look at the SIREtizer process, as ethanol plants join hand sanitizer production effort (Daily Nonpareil)

Valero closes two ethanol plants, retools third to make hand sanitze (San Antonio Express News)

Swiss face shortage of ethanol for disinfectant after abandoning stockpile (Reuters)

Western New York Energy supplies ethanol to U.S. distilleries, global corporations for sanitizer to fight COVID-19 spread (Niagara Frontier Publications)

LaHood Helps Expedite Waiver To Convert Galva Ethanol Plant To Make Hand Sanitizer (WLDS)

Ethanol plant re-tools ro make sanitizer (Geneseo Republic)

Nebraska Innovation Campus, ethanol partners turning out thousands of gallons of hand sanitizer (Lincoln Journal Star)

Repurposing ethanol from biofuel to disinfectant (Deutsche Welt)

Farmers and Biofuel Workers Affected by COVID-19 Pandemic (KSOO)

CLARIANT STARTS MONTHLY PRODUCTION OF 2 MILLION LITERS OF DISINFECTANT IN GENDORF TO SUPPORT VITAL INSTITUTIONS DURING COVID-19 OUTBREAK (Clariant)

Missouri ethanol plant producing alcohol for 50,000 gallons of hand sanitizer (Fox 4 KC)

3,000 gallons of hand sanitizer being made by KAAPA-Ravenna (Kearney Hub)

Galva plant to make sanitizer (State Courier)

Ethanol plants continue to help produce hand sanitizer (Ethanol Producer Magazine)

This Dayton-based ethanol company might repurpose its plants to make hand sanitizer (Dayton Business Journal)

Iowa gifted 5,000 gallons of ethanol for hand-sanitizer project (The Gazette)

ETHANOL PLANTS STEP UP TO FILL NEED FOR HAND SANITIZER (NewsDakota.com)

Member Spotlight: KAAPA Ethanol Steps Up with Sanitizer and Personal Protective Equipment (Renewable Fuels Associaiton)

Western New York Energy supplies ethanol for sanitizer (World-Grain.com)

Clariant begins monthly production of 2 million litres of disinfectant during Covid-19 outbreak (Biofuels International)

“Helping Hands”: BASF significantly expands sanitizer production in Ludwigshafen and supports VCI platform for nationwide emergency provision (BASF)

Poet produces ethanol-based sanitizer for frontline workers (Dakota Farmer)

As U.S. fuel demand dries up, more ethanol producers turn to hand sanitizer (Reuters)

University Hand Sanitizer Project Galvanizes Nebraskan Ethanol Producers (Renewable Fuels Association)

Nearly 30% of ethanol plants idled, including four in Minnesota -- Gasoline demand has dropped, but eased FDA rules have let one plant pivot to hand sanitizer. (Star Tribune)

Bosselman Enterprises distributes free ethanol-based hand sanitizer to area businesses (Grand Island Independent)

Fueling up our hand sanitizer (Grand Island Independent)

Highwater Ethanol supplying 190-proof product used in hand sanitizer (Granite Falls News)

New York Biofuel Plant Supplies Ethanol for Sanitizer (Green Chemicals Blog)

Commonwealth Agri-Energy Partners with Distilleries to Make Kentucky Proud (Renewable Fuels Association)

Spirit of innovation keeps some manufacturers humming (Rochester Business Journal)

Editorial: Kansas farmers finding creative use for ethanol (Topeka Capital-Journal)

Why You Can’t Find Rubbing Alcohol: The U.S. now has vast surpluses of a sanitizing liquid that consumers aren’t allowed to buy. (Wall Street Journal)

Circle Logistics Begins Shipping Bulk Ethanol for Expedited Production of Hand Sanitizer (Circle Logistics)

POET, World’s largest ethanol producer forced to find a new market — hand sanitizer (CNBC)

Circle Logistics Starts Bulk Division Focused on Ethanol (Transport Topics)

Minnesota plant goes ethanol production to hand sanitizer (RFD TV)

Health Canada recalls some hand sanitizers due to industrial-grade ethanol content (BNN Bloomberg)

Ethanol Plants Producing to Protect (Ethanol Producer Magazine)

Area partners team to offer free protective equipment, sanitizer and guidance to small businesses (Daily Nonpareil)

Ethanol Plants Producing to Protect (Ethanol Producer Magazine)

California Company Gets Early Start on Hand Sanitizer Production (Renewable Fuels Association)

EPA issues guidance for ethanol plants producing hand sanitizer (Ethanol Producer Magazine)

Hand Sanitizer, Disinfectant Demands Hit ‘Biblical Proportions’ (Bloomberg)

Excerpt from Associated Press: The problem for the ethanol industry is that most plants make food-grade ethanol, one step below the highest pharmaceutical grade. But since the plants aren’t certified to comply with stringent production standards designed to protect quality of medicines, food ingredients and dietary supplements, the FDA doesn’t want the alcohol used for a product to be applied to the skin.

In addition, the alcohol is not denatured or mixed with a bitter additive to make it undrinkable. The FDA insists this step is “critical” because of cases of poisoning, sometimes fatal, among young children who have accidentally ingested hand sanitizers.

An FDA spokesman said Thursday that regulators have already seen a rise in poisonings linked to hand sanitizers in recent weeks, “heightening this public concern.”

The FDA is also skeptical of industry claims that undenatured sanitizers could be distributed in a way that would keep them away from children.

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The Consumer Brands Association, formerly the Grocery Manufacturers Association, has had conversations with the FDA to push the agency to reconsider its guidelines. The group, which represents branded food, consumer products and beverage companies, said that hand sanitizer supplies are running so low that its members have had to ration it out to workers in stores, distribution centers and manufacturing plants.

“We need a temporary solution,” said Mike Gruber, vice president of regulatory and technical affairs at the trade association. “This goes toward ensuring basic food safety practices.”

Distillers that produce vodka, whisky and other alcoholic drinks have been given some regulatory waivers by the Alcohol and Tobacco Tax and Trade Bureau allowing them to produce hand sanitizer. Many have done that, but they produce much smaller volumes of alcohol than an ethanol plant could produce. They also receive a benefit in the Senate-passed stimulus bill.

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Under the latest FDA guidelines, regulators maintain standards for alcohol, requiring new producers to use alcohol that meets federal or international standards for use in either drugs or food products.

The regulatory hurdles are especially frustrating for Midwest ethanol producers who are facing plunging fuel demand and a petroleum fight between Saudi Arabia and Russia that caused prices to plummet. The factors are forcing more plants to curtail production and close.

For ethanol producers relaxed rules, including a requirement of the hard-to-acquire denaturant, would allow them to step in an help in a national emergency.

“If we could get the FDA to say yes you can use the beverage grade and for the duration of this emergency at least for some point in time here for the next two weeks you can waive the denaturant we would literally have millions of gallons of hand sanitizer available within a matter of days,” said Monte Shaw, CEO of Iowa Renewable Fuels Association, an ethanol trade group. “Every one of our plants has gotten contacted by people who want this stuff and we can’t send it to them.” READ MORE

Excerpt from Daily Nonpareil: Dreessen and Schultz explained the SIRE process and recipe, which comes from the World Health Organization and is approved by the FDA, which produces 250-gallon batches. Plant workers fill plastic totes with 200 gallons of 200 proof alcohol, then add pharmaceutical-grade glycerol, hydrogen peroxide (at 3% before it goes in, Schultz noted), distilled water and a bittering agent. The ingredients are mixed and then the sanitizer is tested in the plant chemistry lab to ensure the alcohol percentage is where it should be — 80%.

With the FDA relaxed guidelines, the only denaturant — an additive required to give a bitter taste to discourage ingestion — SIRE is required to put in the sanitizer is denatonium benzoate. It’s safe for skin, but don’t drink it.

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Staff members do a final quality control check to make sure no particles made it through the process, “and then it’s ready to bottle,” Dreessen said.

Schultz said the totes are triple-rinsed with water and sterilized with alcohol before the process begins. SIRE expects to send out more than 25,000 gallons by the end of the week. One roadblock, which is quickly being overcome, is bottles.

On that front, there’s been help.

After an initial story about SIREtizer by the Nonpareil, CRC Inc. of Council Bluffs reached out and donated 3,000 quart-sized bottles. The business, located on Nebraska Avenue, manufactures food service blenders. Don Crossley, one of the company’s owners, said the company donated the bottles it had left in stock to help the effort. Crossley also helped connect SIRE with an additional source of bottles.

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Last week SIRE also shipped 1,200 gallons of alcohol denatured with isopropyl — a stronger denaturant than the aforementioned denatonium benzoate — to the Iowa Correctional Institution for Women in Mitchellville in central Iowa, with another 1,200 set to go out on Monday. Prisoners there are working on a production line to make sanitizer with the SIRE alcohol blend to be sent to the state’s COVID-19 Emergency Operations Center, where leaders from various state agencies are working to tackle the pandemic.

Daniel Clark, director of Iowa Prison Industries, an agency that provides work training to Iowa inmates, said the prison has produced 2,400 gallons so far, with the plan to produce 4,500 gallons weekly, for the EOC, which distributes the product around the state.

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An additional source of sanitizer throughout the state and region has come from distilleries. Schultz said SIRE is providing alcohol to Patriarch Distillers and Brickway Brewery & Distillery in Omaha and Lonely Oak Distillery in Earling in Shelby County to assist as those companies create hand sanitizer.

SIRE is also setting up contracts with chemical wholesalers and other companies to get more alcohol out for conversion to sanitizer.

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Lastly, SIRE is working with local retailers. Some area bars and restaurants have already worked with the company to sell half-gallon, gallon and quart-sized bottles, available for purchase during a pickup of takeout food and drink. And there are a limited amount of small spray bottles for $4, also. READ MORE

Excerpt from Associated Press/New York Times: The Food and Drug Administration has relaxed regulations on the types of alcohol that can be used to make hand sanitizers during the shortage caused by the coronavirus pandemic, expanding the market to potentially millions of gallons made by ethanol producers.

Hospitals and nursing homes are desperately searching for hand sanitizer, and ethanol plants that can make large batches of its main ingredient, alcohol, have offered to help.

The FDA has stringent production standards designed to protect the quality of medicines, food ingredients and dietary supplements, and it prohibited many ethanol plants from using their alcohol which didn't meet high quality specifications for use in drugs or beverages.

Under the latest FDA guidelines announced Friday, ethanol made at plants that produce fuel ethanol can be used if it contains no additional additives or chemicals from the plants and they can ensure water purity and proper sanitation of equipment. The FDA said it will consider each plant on an individual basis and grant approval only if a plant meets quality control specifications. READ MORE

Excerpt from Topeka Capital-Journal: The Hutchinson News reported last week that two of the plants in Kansas lay idle while the other nine have decreased production by at least 40%.

This shouldn’t come as a shock. After all, gas prices are low due to low demand, and demand is low because most people are staying home where they should be. Thus the demand for ethanol is down. Nevertheless, it’s still an unfortunate blow for corn producers in the state.

Mike Chisam, CEO of Kansas Ethanol in Lyons, told the News’ Alice Mannette demand for ethanol is likely not expected to rebound until 2021. Again not exactly shocking news, but still not what producers were hoping to hear.

Mannette also reported that Kansas ethanol plants are following this national trend. Kansas plants produce more than 600 million gallons of biofuel annually, which according to Kansas Renew, is worth slightly less than $1 billion.

Hearing news of revenue shortfalls during this COVID-19 pandemic is becoming old hat. Even still the Kansas economy is so dependent on agriculture that it’s hard to stomach each of these setbacks. Please don’t forget the impact these plants have on our state both for producers and the jobs the provide to Kansans.

Many of these plants are located in rural areas where employment is already scarce.

With demand low, we’ve seen ethanol producers get creative, pivot and sell their ethanol to people making hand sanitizers. What a creative solution that used a little Kansas common sense.

Two plants — East Kansas Agri-Energy and Pratt Energy — are selling their ethanol to distributors.

“The FDA put a waiver to use fuel-grade ethanol for hand sanitizer. They removed the excise tax until the end of the year,” Bill Pracht, the CEO of East Kansas Agri-Energy in Garnett and vice chairman of Renew Kansas told the News. “Most of our sales have gone outside the state to Texas, Florida and Louisiana. We’ve had some sales in the Kansas City area.” READ MORE