US ethanol plants are expected to cut production due to weak margins and oversupply, according to reports.
Corn is the primary feedstock for ethanol production and floods in the Midwest region earlier this year disrupted planting for farmers. This created uncertainty around corn supply and pricing.
gasworld understands the potential impact on the carbon dioxide (CO2) business is not yet clear, with not all of the ethanol plants likely to be affected contributing to CO2 sourcing.
The CO2 market in the US is known to be largely dependent on bioethanol production, unlike in Europe where it is mostly ammonia dependent, for example.
The CO2-ethanol play in the US
By Sam A. Rushing
Domestic CO2 supplies are highly driven by a well performing ethanol industry. The US ethanol industry has suffered numerous burdens, some of which started before the unseasonable flooding in the US Midwest, this spring.
Prior to this flooding, which impacted the planting of corn during the narrow planting season, were hardships resulting from Trump’s trade war with China, where a significant amount of ethanol would have been sold to this market.
Additionally, high commodity prices for corn have caused some of the Midwest’s long performing ethanol plants to shutter; and precipitate ethanol industry consolidation. Further, margins for ethanol production have been greatly strained due to these factors – and ethanol inventories are well too high – leading to a number of hardships in the industry. China would have been the place to sell ethanol; however due to these tariffs, the market for ethanol sales has been diminished.
Of the total number of domestic merchant CO2 plants, numbering over 100, nearly 40 such plants are sourced from fermentation by-product. This represents a very significant portion of US plants which are highly sensitive to maintaining adequate raw gas feedstock for their operations. Over the last two decades, there was a rapid build-up in new CO2 plants from ethanol. Where this went hand-in-hand with the development and implementation of the fuel grade ethanol mandate for addition into gasoline, as the renewable fuels standard, or the RFS.
The lion’s share of the ethanol plants are located in the Midwest, right within the ‘backyard’ of the corn belt. Since CO2 plants recover the raw gas alongside the raw gas sources, these merchant plants are highly concentrated in this region. The CO2 business operates in a somewhat regional manner, with respect to shipments of refined product to the customer’s storage vessels, primarily via over the road trucks. Rail is also important, however, reliability of rail is often in question.
As a result of what could lead to shortages of CO2 from ethanol plants which recover product from ethanol manufacturing, some of the worst shortages may be felt in the Midwest; however some may also result in more distant markets, such as int to the Mid Atlantic, Northeast, and West – where some of the corn supplies for fermentation are also shipped via rail.
It is not clear as to how much of an impact these burdens may represent to the CO2 industry, where out of about 170 domestic ethanol plants, around 40 are sources for CO2 – therefore, not all ethanol sources which experience problems are current day sources for CO2. If a large round of consolidations should result from these current issues, then perhaps the long term idled or closed ethanol sources which source CO2, may experience the CO2 plants being moved to more stable ethanol plants which remain. Remember, there have been few or no viable options available from other source types to replace ethanol readily – simply since such alternate viable source types are not available.
The CO2 industry always survives, and will continue to do so. Maybe some of these problems will not precipitate many hardships for the domestic CO2 industry.
Sam A. Rushing is President of Advanced Cryogenics, Ltd, a major CO2 and cryogenic gas consulting firm, and equipment supplier. For expertise, please contact: firstname.lastname@example.org