Ethanol

AUGUST 2010

ETHANOL

Global fuel ethanol production is now predicted to grow to 82 billion litres in 2010, up 12% from the previous year but still well behind the average growth rate of 25% over the previous three years. New and expanding blending mandates are taking hold in the US, several countries in Central and South America and the EU.

In the USA the economics of blending remain strong, encouraging discretionary blending, but capacity is still greater than demand. The industry is ramping up production in anticipation of the Environmental Protection Agency increasing the permitted blend level to E12 or even E15. Mandated demand is growing by 14% under the Renewable Fuels Standard to 45 billion litres in 2010.

Brazilian production is set to expand significantly (to 31 million cubic metres) based upon a larger cane supply. The percentage of total recoverable sugars (ATR) going to ethanol is expected to increase to almost 57% in 2010/11. Meanwhile ethanol prices have stabilised making ethanol more attractive again to motorists in many states.

In the EU production is also scheduled to increase and the market will be well supplied in the short term in the context of plentiful feedstocks at competitive prices as three new large plants (Abengoa in the Netherlands and Ensus and Vivergo in the UK) come on stream. Prices remain low as a result.