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U.S. Poised To Ease Biofuel Quotas

Though biofuel technology is moving…

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Good News And Bad News For The Ethanol Industry

The ethanol industry saw some…

Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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China Aims To Boost Ethanol Production

China’s demand for cleaner alternatives to fossil fuels is on track to skyrocket over next few years as the government continues to make strategic moves toward a greener future. As part of this initiative, it is projected that China will more than triple its capacity for production of ethanol in little over a year. According to a Dou Kejun, a researcher at the China National Renewable Energy Centre, the nation is already constructing or seeking approval to construct new ethanol plants with a total production capacity of over 6.6 million tonnes of the mostly corn- and cassava-based biofuel each year.

6.6 million tonnes is an especially stunning figure when you consider that China’s entire ethanol production in 2017 was just 2.8 million tonnes. Feng Wensheng, a manager at Henan Tianguan Group Co Ltd., a major Chinese producer, estimates that current capacity has already risen to about 3.38 million tonnes, including some plants that are still under construction after very recent approval. A major factor in this massive uptick is the government’s announcement last year that they would now be requiring gasoline supplies nationwide to be blended with ethanol by just 2020. This requirement alone will require about 15 million tonnes of ethanol per year.

Unlike ethanol in the United States, the vast majority of which is corn-based, less than half of China’s current ethanol production is derived from corn, a larger portion (1.7 million tonnes) being sourced from cassava. Other sources of Chinese biofuels include wheat, sorghum and rice.

China’s newly soaring demand for ethanol has garnered quite a lot of attention from the international biofuels industry, as most believe it’s highly unlikely that China will be able to produce enough ethanol on domestic soil to meet the nation’s soaring thirst. Contrary to the predominant belief within the industry, researcher Dou reported to Reuters that China’s planned growth in production capacity would take the country “quite close” to the volumes necessary to meet its 2020 objective. He hedged this statement by saying the process is not set, but dynamic and subject to change. Meanwhile, many industry insiders predict that China will need to import large volumes of ethanol from other major international producers of the biofuel such as the United States and Brazil, the world’s first and second biggest ethanol producers, respectively.

Related: Saudi Arabia’s Biggest Geopolitical Error

This dynamic is muddied considerably, however, by the ongoing trade war between China and the United States. After Chinese President Xi Jinping imposed tariffs on U.S. ethanol imports and the U.S. takes a step back from overall trade in China, a surprising player has stepped up to fill China’s unflagging demand. Over the course of just two months, Malaysia--a nation with negligible levels of use or production of ethanol--has shocked the industry by displacing the United States and China’s biggest ethanol supplier.

Where is Malaysia getting all of this ethanol? From the very same nation they displaced. Far from becoming an ethanol producer the size of the United States or Brazil, Malaysia is just playing go-between between the quarreling superpowers, as the Southeast Asian nation has simultaneously ramped up their imports of U.S. ethanol to record quantities. Malaysia serves to fill a loophole in the complicated trade relations between the U.S. and China, as shipments from Malaysia to China are tax-free. Heather Zhang, an analyst for global biofuel industry research firm PRIMA, based in Singapore, says that the sudden and extensive involvement of Malaysia has been an unforeseen shock to the industry, but, “it shows some merchants are enthusiastic in their effort to generate profitability and adapt to change in the international trading environment during this unusual trade war event.”

By Haley Zaremba for Oilprice.com

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