At the U.S. Grains Council's (USGC’s) 20th International Marketing Conference and 63rd Annual Membership Meeting in Savannah, Georgia, the Ethanol Advisory Team (A-team) solidified key market priorities for 2023.
U.S. ethanol exports for marketing year (MY) 2021/2022 totaled 1.45 billion gallons, the third-largest marketing year on record, worth $4 billion.
As the 2022/23 MY takes off, USGC has a renewed focus on Canada, Japan, the European Union (EU) and United Kingdom (U.K.), India and the Southeast Asia (SEA) region.
1. Canada is top destination for U.S. ethanol exports
Canada has been the most consistent ethanol export market for the U.S. since 2010. Canada was the top market destination for U.S. ethanol in MY 2021/22, totaling a record 466 million gallons.
The current national average blend rate has exceeded the clean fuel standard (CFS) requirement of E5 since 2012 and with Canada’s Clean Fuel Regulation (CFR) coming into force in July 2023, the country is gearing up to reach nationwide E15 by 2030.
This will both cut carbon emissions by more than 26 million tons and increase net ethanol demand. In the first four months of the current marketing year, U.S. exports to Canada total more than 180 Mgal, on track for potentially another marketing year record if monthly trends hold.
“With renewed commitments to carbon reduction and a keener focus on energy diversification efforts, we have seen many countries begin to make the transition to include or commit to ethanol blending targets,” said Doug Berven, vice president of corporate affairs for POET, and USGC's current ethanol A-team lead.
“USGC's expanded ethanol promotion programs are seeing a wider range of countries importing and implementing low carbon fuel standards that will allow U.S. ethanol to compete in high value and high margin export markets like never before.”
2. Expanding ethanol exports to Japan
One of the largest markets for U.S. ethanol is Japan. In MY 2021/22, more than 140 million gallons of ethanol were exported in the form of ethyl tertiary-butyl ether (ETBE), an oxygenate for gasoline averaging a country-wide ethanol blend rate of only 1.9%.
The longer-term goal is to see Japan expand total ethanol consumption, begin direct blending of ethanol at a three percent ethanol blend and expand to a 10% ethanol blend, representing a 1.2-billion-gallon market.
In 2018, the U.S. industry was able to enter the Japanese market for the first time with a market share of up to 44%, the revised policy will be issued in April 2023 and USGC and various industry stakeholders have been diligently pursuing 100% market access for U.S. product.
3. EU continues to increase consumption of ethanol
The EU has also been setting records and was the third-largest market for U.S. ethanol in MY 2021/22, totaling nearly 140 million gallons, more than double from the previous marketing year.
Member states such as France and Germany continue to increase their greenhouse gas (GHG) emission reductions through increased consumption of ethanol and the Netherlands and Sweden have rolled out their own E10 mandates.
The U.K. continues to increase its consumption of ethanol and was the sixth-largest market for U.S. ethanol in MY 2021/22, totaling over 80 million gallons, up over 300% from the previous marketing year.
In the first four months of the current marketing year, U.S. exports to the EU and U.K. total more than 55 million gallons. With a continued focus on energy diversification and reducing consumer costs, the EU and the U.K. represent a timely opportunity to increase the emphasis on ethanol’s pricing, energy security and decarbonization benefits to the region.
“USGC will be more prominently engaging within the EU and U.K. region in 2023 to continue the momentum around increased ethanol consumption," said Mackenzie Boubin, USGC director of global ethanol market development. "With success stories of E85 or E10 in many EU member countries, it’s becoming more evident to decision makers the integral role ethanol has in a viable decarbonization strategy that can significantly reduce prices at the pump."
4. India has ambitious blending target of E20
India is a top 10 market for U.S. ethanol year-over-year. It was the fourth-largest market for U.S. ethanol in MY 2021/22, totaling nearly 130 million gallons.
Industrial ethanol will continue to represent a short-term opportunity for U.S ethanol producers with the removal of the 5% customs duty on imported denatured ethanol.
Given the country’s ambitious blending target of E20, U.S. ethanol can facilitate supply gaps, with USGC's office there anticipating a potential 200 million gallon market by 2025.
5. SEA region has ability to expand awareness, education of ethanol benefits
Record U.S. ethanol exports to Singapore placed it as the ninth-largest market in MY 2021/22, totaling 51 million gallons, up more than 1,000% from the previous marketing year. The majority of those exports had an end destination of Indonesia in the form of preblended E3 gasoline.
The Southeast Asia (SEA) region represents many promising transportation markets receptive to ethanol’s octane economics and carbon reduction impacts.
Countries like Thailand, the Philippines and Vietnam all have robust blending policies and strong domestic industries that complement the USGC strategy to increase education and expand awareness of ethanol’s blending benefits.
“With the diversification of our ethanol programs reaching the many various regions, all of which are experiencing similar growth opportunities and renewed ethanol enthusiasm, USGC's ethanol staff looks forward to achieving a productive 2023 year,” Boubin said.