CHICAGO U.S. ethanol producers, looking to relieve a growing domestic glut, are hunting for new international fuel markets to replace China and Brazil after trade disputes slashed exports to those top buyers.
Without new markets, U.S. producers may have to pare output after spending hundreds of millions of dollars on biofuel production plants in recent years. Currently, the most promising potential destinations for U.S. fuel exports appear to be Mexico and India, industry executives said.
China and Brazil accounted for 41 percent of the 1.17 billion gallons the United States exported last year. Shipments to the two shriveled in September, making U.S. exports for that month the smallest in more than a year.
“There are only so many times you can replace your top market,” said Tom Sleight, president of the U.S. Grains Council, which officials said has been calling on potential buyers in Kenya, Ghana and Nigeria.
China’s demand plummeted by more than 100 million gallons this year after it removed a preferential tariff rate. Brazil’s imports tumbled after it put a quota on imports in September to protect its domestic producers.
To drum up new customers, Illinois-based ethanol producer Marquis Energy has sent executives to India, China, Thailand and the Philippines, promoting the corn-based fuel additive as a smog- and oil-import fighter.
“I’ve had a lot of people over there almost nonstop over the last three months,” the company’s chief executive, Mark Marquis, said of the hunt for buyers in Asia. Archer Daniels Midland Co and Flint Hills Resources also have stepped up efforts to sell into Mexico, traders said.
U.S. ethanol prices have slid to nearly a two-year low as daily domestic production last week hit a record 45.1 million gallons, making the search for new export markets more urgent.
Output this year could reach about 16 billion gallons, nearly triple that of 2007.
U.S. exports fell since hitting 2.5 million gallons per day in the first eight months this year. Shipments to Brazil sank to 19 million gallons in September, the smallest monthly volume in more than a year. Exports to China through September were just 60,880 gallons, a precipitous drop from 198 million gallons a year earlier, according to U.S. Department of Agriculture data.
The marketing effort could pay off in Mexico, whose energy regulatory commission (CRE) is to vote soon to ease the flow of fuel imports through state-run Pemex facilities to several Mexican states bordering the United States.
If approved, significant new volumes of gasoline blended with 10 percent ethanol could begin flowing in 2018 into Chihuahua, Coahuila, Nuevo Leon and Tamaulipas states, CRE Commissioner Luis Guillermo Pineda told Reuters.
“The largest supplier is logically the United States, but it can be from anywhere,” Pineda said of the ethanol blend.
Ray Young, ADM’s finance chief, last month told analysts Mexico could be importing 200 million gallons annually by 2019.
U.S. ethanol exports to Mexico last year totaled about 30 million gallons.
U.S. inventories reached 920 million gallons in the week ended November 17, up 16 percent from a year earlier, the U.S. Energy Information Administration said. Ethanol futures have fallen to $1.36 per gallon on the Chicago Board of Trade, down 20 percent from their 2017 high in April.
U.S. producers are pitching China and India on ethanol’s smog-fighting potential. This month, United Airlines canceled flights to India’s capital, New Delhi, citing heavy smog as a public health emergency. China ordered Beijing and more than two dozen other cities to start meeting limits on airborne pollution starting this month.
Ted McKinney, a USDA official interviewed during a biofuel-promotion trip to India, expressed optimism that country could import much more U.S. ethanol for cars and trucks. But others were not so sure.
India’s government wants to promote biofuel production using its own agricultural waste, said Jai Asundi, research coordinator at a Bengaluru-based think tank, the Center for Study of Science, Technology and Policy.
“There is a potential for producing ethanol from locally available sources without depending on imports,” Asundi said.
Source: Voice of America