Global ethanol market: 250 factories shut down

Brian Healy, Director of Global Ethanol Market Development of the United States Grains Council (USGC), stated at the Asia Pacific Petroleum Virtual Conference (APPEC) hosted by S&P Global Platts that the global ethanol market must at least It will not be able to fully recover from the demand shock caused by the spread of the new crown epidemic in 2022. More than 250 ethanol plants worldwide have been closed.

According to Platts analysis data, global ethanol production in 2019 is estimated to be approximately 113 billion liters, compared to approximately 108 billion liters in 2018. Healy said that the United States, Brazil, and the European Union have adopted restrictive measures to curb the spread of the new crown pneumonia epidemic, which has led to a sharp drop in demand, including a 50% drop in US demand for gasoline. Almost 23 billion liters of ethanol production was lost globally, bringing production back to 2013 levels. Platts estimates that global ethanol production in 2020 will reach an average of 1.715 million barrels per day (about 99 billion liters), compared with 1.926 billion barrels per day in 2019. Healy predicts that global ethanol trade will also decline in 2020, mainly due to weakening demand for fuel ethanol and a slight decline in demand for industrial ethanol.

Poor promotion of ethanol gasoline in key markets

Healy said that government policies have played a key role in promoting global ethanol use. In the past two years, 13 markets have announced substantial increases in ethanol demand. However, several major markets including China and Canada have experienced delays in implementing the ethanol directive.

In September 2017, 15 ministries and commissions including the National Development and Reform Commission of China issued the "Implementation Plan on Expanding the Production of Biofuel Ethanol and Promoting the Use of Ethanol Gasoline for Motor Vehicles". Gasoline and 10% ethanol fuel). But at present, China still only has ethanol-gasoline blending requirements in some provinces, some provinces require a blending ratio of 10%, and some provinces are considering a potential blending ratio of 5%. "It is reported that China's delay in promoting fuel ethanol gasoline is partly due to insufficient supply of ethanol from the global market," Healy said.

Another important ethanol market, Canada, is also facing implementation delays. The Canadian government announced the implementation of a biofuel policy including E10 as early as 2006-it will be implemented in Ontario in 2020 and in Quebec by 2021. Healy said that Canada has slowed down in the implementation of E15 ethanol gasoline (including 85% gasoline and 15% ethanol fuel). It was initially expected to be implemented in 2025, but it has now been postponed to 2030.

As policy delays in key markets have a greater impact on the long-term growth of global ethanol demand, the spread of the new crown pneumonia epidemic may affect demand growth in the short term. Therefore, there is still a long way to go to recover ethanol demand. Healy said that at present, there are many unknowns in the response measures of various governments, such as getting people to return to the typical working mode of the past. Therefore, all these factors will continue to affect future gasoline and ethanol demand.

U.S. ethanol exports fall

In April of this year, weekly ethanol production in the United States reached its lowest point in 12 years-600,000 barrels per day. Most production has now rebounded, and ethanol production is about 90% of 2019. Due to reduced demand from big buyers such as Brazil, US ethanol exports also saw a sharp drop in the second quarter of 2020.

Brazil is the largest market for ethanol in the United States. According to official US data, from September 2019 to July 2020, US ethanol exports to Brazil fell by 357 million liters to 989 million liters. Demand in Brazil has fallen because the previous drop in sugar prices has stimulated domestic ethanol production in Brazil, and tariff quotas have also hindered exports. Brazil announced on September 14 that it would extend the 20% tariff on additional imported ethanol from the United States for another 90 days.

Canada is the second largest market for ethanol in the United States, and its ethanol import demand has also declined. According to data from the US Census Bureau, for the 2019 sales year ending in July, Canada's imports of US ethanol fell by 57 million liters year-on-year. Healy said: "The decline in Canadian ethanol imports is mainly due to the reduction in demand caused by the domestic prohibition of going out. In 2020, the overall demand for fuel and gasoline in Canada has fallen by about 15%."

Industrial applications of ethanol are increasing

Healy said that India, South Korea, Mexico and Nigeria are all industrial export markets for US ethanol, and shipments of export goods to these places are increasing. According to data from the US Census Bureau, from 2019 to 2020, US ethanol exports to Mexico have seen significant changes, and US ethanol shipments have increased by 83 million liters compared with the previous season. After the outbreak of the new crown pneumonia, the demand for ethanol-containing hand sanitizers has surged, which has led to a sharp rise in the application of ethanol in the industry. Healy said that markets such as South Korea import ethanol from the United States and supply end products such as hand sanitizer to markets such as Japan and Southeast Asia.