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Asia Ethanol

Chinese policy shift sets stage for ethanol import boom

Chinese ethanol imports are set to carry strong growth into next year, with expectations they could rise 30% on current 2015 levels, according to reports by the US FAS. Imports this year have already trebled from 2014’s paltry levels, hitting 54,000m3 so far in 2015. China’s domestic ethanol production is also expected to rise 1.3%, although higher domestic corn prices and government restrictions on grain based ethanol production have resulted in domestically produced ethanol being on average over $250/m3 more expensive than imported ethanol in June.

 

China is actively trying to discourage domestic production of ethanol from grain based feedstocks, to assuage food versus fuel concerns. The government this year eradicated subsidies for conventional agricultural-based biofuels, with corn based ethanol currently accounts for 70% of all domestic production.  Feedstock shortages and technical limitations are expected to make it difficult for ethanol producers to reach ambitious targets for cellulosic and non-grain based biofuel production, which are currently under discussion before being formalised in a five-year development plan for 2016 – 2020.

 

2012 free trade agreements eliminated import tariffs on China’s top ethanol supplier Pakistan, as well as 10 ASEAN countries, Chile and Vietnam. Pakistan remains one of the largest producers of sugar-based hydrous ethanol in Asia, supplying over 75% of Chinese imports so far this year. Chinese import tariffs on denatured ethanol have otherwise been falling, dropping from 30% in 2009 to 5% in 2015. Import taxes on un-denatured ethanol remain considerably higher at 40%. The use of imported denatured ethanol in the transport sector remains heavily restricted in the six provinces and 30 cities which already carry an E10 mandate, with the majority of imports used in chemical processing.

NB – 09/09/2015

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