US ethanol makers call on Mexico, India to reduce biofuel glut
CHICAGO (Reuters) — US 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, US 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 US fuel exports appear to be Mexico and India, industry executives said.
China and Brazil accounted for 41% of the 1.17 Bgal the United States exported last year. Shipments to the two shriveled in September, making US 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 US Grains Council, which officials said has been calling on potential buyers in Kenya, Ghana and Nigeria.
China's demand plummeted by more than 100 MMgal 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.
US ethanol prices have slid to nearly a 2-yr low as daily domestic production last week hit a record 45.1 MMgal, making the search for new export markets more urgent. Output this year could reach about 16 Bgal, nearly triple that of 2007.
US exports fell since hitting 2.5 MMgal/d in the first 8 mos this year. Shipments to Brazil sank to 19 MMgal 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 MMgal a year earlier, according to US 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% 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 MMgal annually by 2019. US ethanol exports to Mexico last year totaled about 30 MMgal.
US inventories reached 920 MMgal in the week ended Nov. 17, up 16% from a year earlier, the US Energy Information Administration said. Ethanol futures have fallen to $1.36/gal on the Chicago Board of Trade, down 20% from their 2017 high in April.
US 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 US 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 Bengaluru-based think tank Center for Study of Science, Technology and Policy (CSTEP).
"There is a potential for producing ethanol from locally available sources without depending on imports," Asundi said.
Reporting by Michael Hirtzer; Additional reporting by David Alire Garcia in MEXICO CITY, Mayank Bhardwaj in NEW DELHI and Yashaswini Swamynathan in BANGALORE; Editing by Gary McWilliams and David Gregorio
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