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U.S. Ethanol Market: Prices Are Soaring, Bioethanol Displaces Synthetic Alcohol

ethanol

U.S. Ethanol Market: Prices Are Soaring, Bioethanol Displaces Synthetic Alcohol

IndexBox has just published a new report: ‘U.S. – Ethyl Alcohol – Market Analysis, Forecast, Size, Trends and Insights.‘ Here is a summary of the report’s key findings.

In November 2021, U.S. ethanol prices hit over $3.2 per gallon, doubling against the same period in 2020. Despite this, the last factory in the U.S. producing synthetic ethanol announced ceasing operations because it cannot compete with bioethanol in terms of costs. Government investments worth $26M will drive U.S. biofuel infrastructure development. A conflict between biofuel producers and the Environmental Protection Agency is coming to a head because the agency delayed issuing the 2022 Renewable Volume Obligation (RVO). This document was expected to propel the bioethanol market by elevating the standards for the biofuel percentage used in blends with traditional gasoline and diesel.

Key Trend and Insights

According to the USDA, the Eastern Cornbelt average ethanol price grew from $1.4 per gallon in January to more than $3.2 per gallon in November 2021. The most significant gains were seen past month when prices for the alcohol leapt up by more than 30%.

In the U.S., ethanol fuel production has rebounded since its downturn the previous year. According to the EIA, throughout the first eight months of 2021, there were 3.9M barrels of ethyl alcohol produced. In the same period of 2020 and 2019, 3.7M barrels and 4.0M barrels were manufactured, respectively.

Global demand for American ethanol is growing. In the first nine months of 2021, U.S. exports of ethyl alcohol consisted of $1.83B, which is 5.8% more than the same period in 2020. During the twelfth Ministerial-level meeting of the India-U.S. Trade Policy Forum, the Indian side expressed interest in obtaining a massive supply of the alcohol from the US. India’s national goals call for increasing the amount of ethanol blended with petrol to 20% by 2025.

Even though the growth in demand and increased prices are beneficial for U.S. ethanol producers, the last synthetic ethanol facility in the U.S., Tuscola Plant, owned by petrochemical giant LyondellBasell, announced that it would close at the end of 2021. Faced with rapidly increasing costs for resources and energy, specifically ethylene and natural gas, synthetic ethanol cannot compete with bioethanol. Meanwhile, prices for corn, which is widely used to produce the alcohol, have gone down this year: Eastern Cornbelt average corn price decreased from $7.60 per bushel in May to $5.60 in November.

Government policies will stimulate development in the bioethanol market. The U.S. Agriculture Department announced that it would invest $26M into building biofuel infrastructure in 23 states as part of the ‘Higher Blends’ program. The subsidies will stimulate replacing old-style fuel pumps and storage tanks with blended pumps and tanks suitable for E15 and E85 fuels, as well as biodiesel. The USDA projects that the grants will help increase potential sales for biofuels by 822M gallons per year.

The relationship between biofuel producers and government bodies worsens, threatening to become a severe conflict. Growth Energy, the leading American trade association advancing biofuel usage, submitted a notice of intent to sue the Environmental Protection Agency (EPA) for failing to issue on time the 2022 Renewable Volume Obligation (RVO), which regulates the blending standards of biofuels with traditional automotive fuels. By retaining the status quo for the RVO, current standards won’t be reevaluated to increase the percentage of green energy sources used and thus hinder growth in the biofuel market.

U.S. Ethyl Alcohol Exports

In 2020, exports of ethyl alcohol from the U.S. reduced to 6.5B litres, falling by -7.7% against the year before. In value terms, ethanol exports contracted to $2.4B (IndexBox estimates) in 2020.

Canada (1.5B litres), Brazil (946M litres) and India (898M litres) were the main destinations of ethanol exports from the U.S., together comprising 52% of total exports. South Korea, Mexico, the Netherlands, Colombia, the Philippines, Peru, Nigeria, the UK and China lagged somewhat behind, together comprising a further 37%.

In value terms, Canada ($596M), Brazil ($318M) and India ($312M) appeared to be the largest markets for ethanol exported from the U.S. worldwide, with a combined 51% share of total exports. South Korea, the Netherlands, Mexico, Colombia, Peru, the Philippines, Nigeria, the UK and China lagged somewhat behind, together accounting for a further 37%.

In 2020, the average ethanol export price amounted to $0.4 per litre, rising by 6.1% against the previous year. Prices varied noticeably by the country of destination; the country with the highest price was the Netherlands ($0.5 per litre), while the average price for exports to the Philippines ($0.3 per litre) was amongst the lowest. In 2020, the most notable rate of growth in terms of prices was recorded for supplies to the Netherlands, while the prices for the other significant destinations experienced more modest paces of growth.

Source: IndexBox Platform 

corn

Global Corn Market Maintains Steady Growth Despite Lower Bioethanol Demand

Driven by rising demand from the food industry and favorable weather, global corn production increased significantly in 2020. The rise in prices made the raw corn-based production of bioethanol unprofitable amid the low cost of traditional fuels due to the pandemic, resulting in the closure of some distilleries. In the future, the growing demand for alternative fuels is expected to offset this shift and promote the corn market.

IndexBox has just published a new report: ‘World – Maize – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

Key Trends and Insights

Driven by rising demand from the food industry and favorable weather, global corn production grew by 2% to 1,435М tonnes in 2020 (IndexBox estimates). Brazil (+7M tonnes), South Africa (+1.2M tonnes) and India (+1.2M) tonnes indicated the most substantial increase in output.

Global corn exports saw a 6% rise, to 168.2Ðœ tonnes. In 2020, global corn prices increased substantially, from $170 per tonne in March 2020 to $240-280 per tonne in March 2021. Argentina retained the lowest competitive export prices in 2020 ($239 per tonne, FOB).

High corn prices resulted in lower competitiveness of corn bioethanol, which aggravated the pandemic-related drop in demand for biofuels. This led to bioethanol plants being forced out of production: according to the Renewable Fuels Association (RFA), approx. 20 out of the 200 ethanol production facilities in the U.S. remain idle; a further 20 have cut production. The volumes of corn intended for biofuel production were redirected to growing exports.

In the period to 2030, the global corn market is set to expand to 1.978M tonnes. Increasing corn consumption in the food sector driven by steady population growth remains the key development factor in terms of market expansion. The market for alternative fuels may yet see significant development, thereby increasing the demand for corn, should environmental standards become more stringent and a carbon tax on greenhouse emissions be imposed.

China, the U.S. and Brazil Consume more than Half of Global Corn Production

The countries with the highest volumes of maize consumption in 2019 were China (523M tonnes), the U.S. (322M tonnes) and Brazil (60M tonnes), with a combined 64% share of global consumption. Mexico, Indonesia, Argentina and India lagged somewhat behind, together accounting for a further 9.2%.

In value terms, the largest maize markets worldwide were China ($170.8B), the U.S. ($106B) and Mexico ($22.5B), with a combined 60% share of the global market. Indonesia, Brazil, India and Argentina lagged somewhat behind, together comprising a further 8.2%.

The countries with the highest levels of maize per capita consumption in 2019 were the U.S. (978 kg per person), Argentina (619 kg per person) and China (359 kg per person).

Brazil Leads in Exports

Brazil (43M tonnes), Argentina (29M tonnes), Ukraine (27M tonnes) and the U.S. (26M tonnes) represented roughly 79% of total exports of maize in 2019. The following exporters – Romania (4.6M tonnes), France (3.7M tonnes), Russia (3.1M tonnes), Hungary (3M tonnes), Paraguay (2.7M tonnes) and Bulgaria (2.6M tonnes) – together made up 12% of total exports.

In value terms, the U.S. ($8.9B), Brazil ($7.3B) and Argentina ($6B) were the countries with the highest levels of exports in 2019, together comprising 62% of global exports. These countries were followed by Ukraine, France, Romania, Hungary, Russia, Bulgaria and Paraguay, which together accounted for a further 28%.

In 2019, the average maize export price amounted to $229 per tonne, approximately reflecting the previous year. Overall, the export price, however, showed a pronounced contraction. The pace of growth was the most pronounced in 2017 an increase of 13% year-to-year. The global export price peaked at $301 per tonne in 2013; however, from 2014 to 2019, export prices stood at a somewhat lower figure.

Source: IndexBox AI Platform

gas

OPEI/Harris Poll Reveals Consumers Assume Fuel Safety at the Pump

For the last six years in a row, research has confirmed consumers at the gas pump are simply unaware of exactly what kind of fuel is being purchased, along with the potential risks at hand to small engine products such as snowmobiles, golf cars, and transport motor vehicles, according to findings discovered in a study by Harris Poll and Outdoor Power Equipment Institute (OPEI).

“Higher ethanol blends, like E15, E30, and E85, are illegal to use in most outdoor power equipment and can damage or destroy it, and invalidate manufacturer’s warranties in many cases,” said Kris Kiser, President and CEO of OPEI in response to a recent poll revealing consumers are simply confused when at the pump.

The survey revealed that 61 percent of American consumers assume fuel safety while only 20 percent state they actually notice the ethanol content.

“Unsurprisingly, the latest findings only further reinforce the notion that year-round sales of E15 will needlessly introduce additional confusion into the marketplace,” said National Marine Manufacturers Association President Thom Dammrich. “We need the government to eliminate barriers for boaters to enjoy a day on our nation’s waterways, not create additional risks that jeopardize their safety. We stand ready to work with both lawmakers and the broader industry to identify policy solutions that protect consumers and their families from the dangers of misfuelling.”

The below infographic provided by OPEI outlines tips for consumers to consider when selecting fuel options: