The global ethanol market will not fully recover until 2022

Brian Healy, USGC's director of global ethanol market development, said at APPEC hosted by S&P Platts that the global ethanol market will not fully recover from the demand shock caused by the spread of the neo-crown epidemic until at least 2022, and that more than 250 ethanol plants around the world have already closed.

Global ethanol production is estimated at about 113 billion liters in 2019, compared with about 108 billion liters in 2018, according to Platts analysis. Restrictive measures in markets such as the U.S., Brazil and the European Union to curb the spread of the neo-coronary pneumonia epidemic have led to a significant drop in demand, including a 50 percent drop in demand for gasoline in the U.S., Healy said. Nearly 23 billion liters of ethanol production were lost worldwide, bringing production back down to 2013 levels. Platts estimates that global ethanol production will average 1.175 million barrels per day in 2020, compared to 1.926 billion barrels per day in 2019. Healey expects global ethanol trade to decline in 2020 as well, mainly due to weakening demand for fuel ethanol and a small decline in industrial ethanol demand.

Poor ethanol rollout in key markets
Government policies have played a key role in promoting global ethanol use, Healy said, with 13 markets announcing significant increases in ethanol demand over the past two years. However, several major markets, such as China and Canada, have experienced delays in implementing the ethanol directive.

In September 2017, China's National Development and Reform Commission (NDRC) and 15 other ministries issued the Implementation Plan on Expanding Biofuel Ethanol Production and Promoting the Use of Automotive Ethanol Gasoline to promote the use of E10 ethanol gasoline (containing 90% gasoline and 10% ethanol fuel) nationwide by 2020. However, China still only has ethanol blending requirements for gasoline in some provinces, with some requiring 10 percent blending and others considering a potential 5 percent blending rate. "It is noted that China's delay in rolling out fuel ethanol to gasoline is partly due to a shortage of ethanol supply obtained from the global market," Healy said.

Another important ethanol market, Canada, is also facing implementation delays. The Canadian government announced back in 2006 that it was implementing a biofuels policy that included E10 - to be implemented in Ontario in 2020 and in Quebec by 2021. Healey said Canada has slowed down on the implementation of E15 ethanol (containing 85% gasoline and 15% ethanol fuel), which was initially expected to be implemented in 2025, but has now been delayed until 2030.

As policy delays in key markets have a significant impact on the long-term growth aspect of global ethanol demand, the global spread of the neo-coronary pneumonia epidemic is likely to impact demand growth in the short term. As a result, ethanol demand recovery has a long way to go. Healy said that at this point in time there are a lot of unknowns in governments' responses, such as getting people back to the typical working patterns of the past. As a result, all of these factors will continue to impact future demand for gasoline and ethanol.

U.S. ethanol exports down
In April of this year, weekly U.S. ethanol production reached a 12-year low - 600,000 barrels per day. Most production has now rebounded, with ethanol production at about 90% of 2019 levels. U.S. ethanol exports also fell sharply in the second quarter of 2020 due to reduced demand from large buyers such as Brazil.

Brazil is the largest market for U.S. ethanol. U.S. ethanol exports to Brazil fell by 357 million liters to 989 million liters from September 2019-July 2020, according to official U.S. data. The drop in demand in Brazil came as sugar prices had fallen further, while domestic ethanol production was spurred, while tariff quotas also hampered exports. Brazil announced on Sept. 14 that it was extending the tariff on 20% of imported ethanol outside the U.S. quota for another 90 days.

Canada, the second-largest market for U.S. ethanol, has also seen a decline in demand for its ethanol imports, with Canadian imports of U.S. ethanol falling by 57 million liters in the 2019 marketing year ending in July, according to US Census Bureau data. Healey said: "The decline in Canadian ethanol imports is primarily due to reduced demand due to the domestic ban on going out order, which reduced overall demand for fuel and gasoline in Canada by about 15 per cent in 2020."

Ethanol industrial applications on the rise
India, South Korea, Mexico and Nigeria are all industrial export markets for U.S. ethanol, and export shipments to these locations are increasing, according to Healey.Census Bureau data show a significant shift in U.S. ethanol exports to Mexico in 2019-2020, with U.S. ethanol shipments compared to the previous sales season An increase of 83 million liters. A surge in demand for hand sanitizers containing ethanol following the neo-coronary pneumonia outbreak has led to a sharp rise in industrial applications of ethanol. Markets such as South Korea import ethanol from the United States and supply end products such as hand sanitizers to markets such as Japan and Southeast Asia, Healy said.