Analysis: Pandemic Weighed on Global Ethanol Trade
USDA data shows U.S. ethanol exports were down 12% year-over-year
At the close of the most recent marketing year, U.S. ethanol exports were down 12% year-over-year according to data from the U.S. Department of Agriculture (USDA), weighed on by COVID-19 and the global issuance of stay-at-home orders.
Over the course of the marketing year (September 2019-August 2020), U.S. ethanol exports, which account for nearly 60 percent of global trade, faced losses in fuel markets while staying relatively flat in industrial-use markets. New markets did emerge as ethanol demand increased in support of human health for sanitizing applications.
“In a typical year, about a quarter of U.S. ethanol exports are destined for industrial use markets. For some months in 2020, that shot up to half,” says Brian Healy, USGC director of global ethanol market development. “While the full effects of the pandemic have not been realized, stay-at-home orders were just reissued in many European Union (EU) member countries, and policy developments continue to move forward in critical markets that will drive ethanol demand in the future.”
For fuel markets, stay-at-home orders led to an overnight demand loss in the United States and around the world. The initially hopeful V-shaped recovery remains to be fully realized as a long tail of recovery that includes working from home, a patchwork of government stay-at home-orders and a lack of a vaccine hamper recovery.
Translated to global fuel ethanol demand, U.S. exports are down in all top 10 fuel ethanol export markets - Brazil, Canada, the EU and the United Kingdom (UK), Colombia, Philippines and Peru – a loss of 161 million gallons across those six markets. Notably, the octane markets of the Persian Gulf, Oman and United Arab Emirates (UAE) dropped out as top destinations due to the shift in pricing economics since the pandemic has been underway.
Renewable energy and trade policies also weighed on 2019/2020 global demand.
China, with the second-largest fuel pool in the world, equal to less than half that of the United States, is notably absent from the top 10 markets, with no sizeable ethanol imports since the 2017/2018 marketing year, when 70 percent duties from Section 232 and 301 were placed on U.S. ethanol imports to the market.
“Today, even without the nationwide E10 policy in effect, China is deficit of ethanol based on provincial policies already in place,” Healy said. “As with other countries that produce ethanol domestically, China stands to benefit in having access to the global ethanol market and to reinvigorate its national blending program for a cohort of reasons.”
On the industrial side, exports are up to South Korea, Mexico and Nigeria, which combined posted a 52-million-gallon increase. India was an exception, but only dropped one percent year-over-year.
Over the course of the pandemic, many U.S. ethanol producers responded to increased U.S. and global demand for industrial grades of ethanol by expanding or building out new capacity for those grades, which for certain operations, are positioned to further supply global markets. In many key markets, like Japan, Brazil has been a dominant supplier of industrial ethanol.
“Many factors contribute to this imbalance of market share, including long-standing relationships,” Healy said. "It will be critical for the U.S. industry to convey expanded availability of industrial-grade ethanol to meet current and expanded future global demand.”
COVID-19 is forecast to continue weighing on the global ethanol market, with 2019 production levels not expected to return until at least 2022. Even still, the Council and its global presence has continued to work to expand the global use of ethanol.
“With our country and regional offices and representatives, the Council has maintained and even expanded programs in certain markets to ensure this pandemic does not translate to lost years on global ethanol policy implementation, on trade environments accessible to U.S. producers and on emerging trends that will impact the industry for the years beyond the pandemic," Healy said.