Viewpoint: Pandemic Drives Asia-Pacific Ethanol Markets

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December 31, 2020

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by Lauren Moffitt (Argus Media) Weaker crude oil prices have eroded the competitiveness of biofuels as a transport fuel in a global economy battered by Covid-19, leaving any expansion of ethanol-gasoline blending in Asia-Pacific tightly tied to domestic feedstock availability in 2021.

India may boost fuel ethanol production to record levels in 2021 following measures to support the industry in 2020 amid wider agricultural reforms, with the sector touted as a linchpin of the post-pandemic recovery by the country’s finance ministry.

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Exporting sugar will become less viable once the World Trade Organization disallows state subsidies for exporters from 2023.

China’s ballooning corn purchases from the US suggest that there will be very little of its main ethanol feedstock left in the country in 2021.

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Mandate rollbacks to the 10pc ethanol blend requirement show no signs of reversing while ethanol prices are starkly higher than gasoline, ….

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With uncertain demand and weak production margins at home, the US will be keen to expand the fuel ethanol export market. But momentum in Asia-Pacific is severely lagging given low oil prices.

Resistance to ethanol development persists from both refiners and consumers in key contender Vietnam, with blending rates lingering at three times below the E5 target established in 2018. Market participants see little change in 2021, despite the national trade ministry signing an agreement with the US grains council in October and reducing import tariffs in July.

Declining oil prices have increased the funding required to subsidise ethanol blends at the pump to price levels acceptable to consumers doubtful about quality, a hard policy to sell as imports would need to fill a gap of over 200,000t to meet E5 in a market where the sole domestic supplier Tung Lam produced just 31,500t in 2019. The firm has partially converted its facilities to imported corn-based production since locally-grown cassava became too pricey to use as feedstock following higher domestic and overseas food and feed demand. READ MORE

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