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China could play big role in improving U.S. ethanol margins
The U.S. ethanol industry is hopeful China will play a significant role in improving margins.
Randall Doyal, CEO of Al-Corn Clean Fuel in Claremont, Minnesota says before the trade war, exports to China were trending higher.
But the combination of lost market-share and oil refinery waivers issued by the EPA has turned many ethanol plants like his upside down.
“They took so much demand off the market, and we’re looking for other places to fill that demand. And China would certainly be a significant demand market for us.”
He tells Brownfield as trade talks between the U.S. and China progress, a new agreement probably wouldn’t be a silver bullet for ethanol.
“the Chinese market is a two-edged sword (in that) it tends to cut both ways. You can build a great new market with a lot of demand, and have it suddenly jerked right out from under you. That’s kind of been the Chinese way for years.”
Doyal says he’d also like to see tariffs between the U.S. and Mexico eliminated because there’s great potential for ethanol in that market as well.
Tags: Al-Corn Clean Fuel, China, Corn, Crops, EPA, Ethanol, Mexico, Minnesota, Renewable Fuels, Small refiner waivers, tariffs, USMCA
Excellent commentary on the state of the ethanol industry. The ethanol industry needs sustainable, long term markets to avoid the profitability roller-coaster we are currently on. The best markets are the ones we can count on today, tomorrow and well beyond into the future. It’s hard to invest hundreds of millions of dollars without commitment to future market volumes. China is said to need perhaps 218,000 Barrels per Day of imported ethanol to meet its 2020 10% nationwide blending target. That level of imports is about twice total current US ethanol exports of around 114,000 Barrels per Day. So, the potential China ethanol market is huge to say the least. But that level of imports will never occur without commitments for sustainable, long-term purchases of imported ethanol. The 218,000 Barrel per Day number for imports would require production from about 33 – 100 Million gallon per year ethanol plants. Who is going to build those plants without a commitment from China to purchase the ethanol? A bird in the hand? No, China has always been – two birds in the bush. I hope China resumes purchase of American Ethanol, that would be wonderful, but until real long-term commitments are made, the prospect of importing up to 218,000 Barrels per day of ethanol into China is just a mirage.