THE WORLD ETHANOL MARKET › download › foroglobalbioenerr... · 2018-12-01 · DATAGRO Sugar and...

DATAGROSugar and Ethanol Market Analysis

Global Forum on Bioenergy - 2007Plinio Mario Nastari

THE WORLD ETHANOL MARKETby

Plinio M. Nastari, M.Sc., Ph.D. (DATAGRO - Brazil)

Global Forum on Bioenergy11-13 July 2007

Rosario, Argentina



World Ethanol

Biomass ethanol has gone long waysto reach the production levelsobserved today.



US: Henry Ford and his automobile using pure ethanol as fuel, in 1896



Brazil: ethanol use dates back to 1931 (5% v/v)First tests made in 1925.



World Ethanol Production2006 - 51.32 billion liters

57 producing countries in the world DATAGROFor 2007, world ethanol production projected at 62.6 billion liters, Or 109.6 million tons of sugar equivalent.

Asia, 6.43

Brazil, 17.83

Oth.Americas, 1.77

Africa, 0.63Europe, 4.64

USA, 19.85



Ethanol market is growing faster thanSugar

• The ethanol market rises at a higher rate thansugar, in Brazil and abroad.

• In the short run, world production and use of ethanol will rise faster than exports.



World Ethanol Production(in billion liters)

25

30

35

40

45

50

55

2000

2001

2002

2003

2004

2005

2006

Source: Datagro

10.7% a.a.

28

51.32



World Sugar Production(in million tons raw equivalent)

100

110

120

130

140

150

160

170

2000

2001

2002

2003

2004

2005

2006

Source: ISO

3.0% a.a.

130

155



World Sugar Production (in million tons raw equivalent)

100

110

120

130

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150

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170

2000

2001

2002

2003

2004

2005

2006

Source: ISO

3.0% a.a.

130

15551.3 billion liters of ethanol = 85.5 million tons of sugar



Increasing interest towards ethanolIt is increasingly recognized as one of the few attainable alternatives to solve

the 2 most relevant issues of mankind today:• find a viable replacement to oil;• Mitigate emmission of greenhouse gases that cause global warming.

Climate Change



Still a Drop in the Bucket– Brazil stands out as the country where the use of biomass

ethanol represents a large share of energy consumption(2006):• 13.2% (in t.o.e.) of the consumption of energy used in transportation;• 36% (in gasoline equivalent) of the total consumption of Otto-cycle

fuels (this % reached 56.9% in 1988).– In the USA, where ethanol production rivals with that of

Brazil, ethanol represents 3.4% of Otto-cycle fuel demand (2006).

• In the world: bioethanol represents– 3% of consumption of gasoline, and– 0.7% of oil demand, which explains why it is considered a exotic

fuel for many.



Potential Market is Very Large

• The world of fuels and petrochemicalapplications is MUCH larger than the world of sugar.

• Sucrose can substitute starch in existingapplications (aminoacids, vitamins, etc);

• Sucrose can become raw material for polyethilene, PET, textile fibers, etc.



Fuels vs Sugar

• 2006: world ethanol productionfor fuel use is 34.5 billionliters.

• 3% of world demand for gasoline.

• World fuels demand expectedto grow 40% until 2020.

• E10 in world´s gasoline today• =117 billion liters• =202 million tons of sugar • = 133% of current world sugar

demand.



Brazil´s current production of Sugar and Ethanol

• Sinergy between the production of sugar and ethanol allowedaccumulation of capital which enabled expansion during the past 31 years.

• Production in 2006/07 vs 1975/76:

Crop Year 2006/07 1975/76Cane (milion tons) 428.01 91.52 Sugar (milion tons) 30.05 6.02 Ethanol (billion liters) 17.85 0.56 % sucrose for ethanol 49.5% 13.7%% sucrose for export sugar 33.5% 19.7%% sucrose for export ethanol 10.7% 0.0%Source: Datagro



Supply of Sucrose in Brazil(in 000 tons)

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2006

Source: Datagro

62.3 mm tons in 06/07

7.3 mm tons in 75/76



Aver.Agroindustrial Yield – Brasil(in litres of hydrous ethanol equivalent per hectare)

15002000250030003500400045005000550060006500

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1977

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1981

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Source: Datagro

+3.61% aa in 31 years

6073

2024



1

10

100

0 50000 100000 150000 200000 250000 300000Produção Acumulada de Etanol (mil m3 )

(200

4) U

S$ /

GJ

útei

s

Ethanol prices in Brazil Rotterdam regular gasoline price

trend (Rotterdam gasoline prices) trend (Ethanol prices)

19862004

2002

1999

1980

1990

1995

2002

2005

Source: Nastari, P.M. "Competitividade da Produção de Etanol de Cana-de-açúcar no Brasil: as três ondas de desenvolvimento", V Conferência Internacional da Datagro sobre Açúcar e Álcool

Learning Curve – Anhydrous Ethanol, Grand Hyatt São Paulo, 20 de setembro de 2005, São Paulo, SP.



Supply of Sucrose in Brazil(in 000 tons)

20000250003000035000400004500050000550006000065000700007500080000850009000095000

100000

1999

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Source: Datagro

Growth path will not be a straight line

Long run sustainedrate of growth isestimated at 7.3% aa

7.3% aa



The Flex Fleet as the Lung of theSystem

• With this perspective, the flexfleet can work as the ‘lung’ of the system, absorbing TRS surplus.

• Flex fleet brought greater price-elasticity to fuel demand in theshort-run.

• Many are not taking this effectinto account.

• Over time, reduces theimportance of surplus stats onworld S&D.



The Flex Revolution• Flex cars launched in March 2003.• In June 2007 already represented 85% of total vehicle

sales.– In Dec/06 flex fleet totalled 2.629 million cars, growing at the

rate of ~1.6 million/year.– Consumption/vehicle is a function of vehicle age. On average

is 200 l/v/m, or 2.4 m3/y, when using hydrous ethanol.– Potential annual rise in demand (100% flex cars using

ethanol): 1.6 x 2.4= 3.84 bi liters of hydrous = 6.2 mio tons sugar.



Sales of Vehicle by Type of Fuel

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Jan-03apr/03Jul-03oct/03Jan-04apr/04Jul-044-Oct5-Jan5-Apr5-Jul5-Oct6-Jan6-Apr6-Jul6-Oct7-Jan7-Apr

Alcool Flex Fuel Gasool

January 2003 to April 2007January 2003 to April 2007

Source: Anfavea

Flex = 78.1% of sales in 2006

82.1% inApr/07



• In 5 years, the flex fleet will be ~9.2 million vehicles.• By then, a small 10% swing in fuel use preference

will be equal to 2.2 billion liters hydrous/year, orequivalent to 3.6 mio tons of sugar/year.

• World S&D for sugar and ethanol will be verydependent on relative prices of ethanol and gasoline.

The ‘flex’ impact overtime



The explosive expansion in the US2006• Production of 19.85 billion liters, from 6.5 billion

liters in 2000.• Ethanol fuel: 3.4% of gasoline pool.Capacity:• 2007(1Q): 22.3 billion liters• +12 billion liters under construction.• Projects under evalluation: +66 billion liters of

capacity• Total capacity can grow to 100 billion liters.



Ethanol Demand in the USMain factors until recently• Substitution of MTBE • Renewable Fuels Standard (RFS)

– Rise in fuel demand from 15.1 to 28.4 billion liters (2006-2012).

EUA: Demanda de Etanol pelo RFS(em bilhões de litros)

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Datagro

15.1

28.4



Other Fators in the US MarketOther factors• State mandates:

– Minnesota: 10%, going to 20% (2010)

– 10% (E10): Montana (2006), Louisiana (2007), Washington and Missouri (2008).

– 20%: Nebraska considering.• E85

– >6 million flex cars already running.– Only 800 E85 pumps E85 out of total

119,000– Introduction of legislation to provide

incentives for more E85 pumps.• Gasoline demand in the US (2006)

– 540 billion liters, or 9.2 millionbarrels/day, or 46% of world demand, of 20.1 million b/d.

http://images.google.com/imgres?imgurl=http://www.mobilemag.com/content/images/7456_large.jpg&imgrefurl=http://www.mobilemag.com/redirect.php%3Fcontent%3D7456&h=212&w=332&sz=13&tbnid=zeUnnlta73FfQM:&tbnh=73&tbnw=115&hl=pt-BR&start=34&prev=/images%3Fq%3Dethanol%2Busa%26start%3D20%26svnum%3D10%26hl%3Dpt-BR%26lr%3D%26rls%3DRNWG,RNWG:2005-15,RNWG:en%26sa%3DN

http://images.google.com/imgres?imgurl=http://barnabyjoyce.com.au/gallery/images/Gallery%25201/St.George%2520ethanol.JPG&imgrefurl=http://cattlethief.blogspot.com/&h=500&w=652&sz=47&tbnid=vLWfWV3NW04mbM:&tbnh=103&tbnw=135&hl=pt-BR&start=113&prev=/images%3Fq%3Dethanol%26start%3D100%26svnum%3D10%26hl%3Dpt-BR%26lr%3D%26rls%3DRNWG,RNWG:2005-15,RNWG:en%26sa%3DN



New Targets for Renewables in the US

Pres. Bush (State of Union 2007)• Until 2017: substitute 20% of all

gasoline = 132 billion liters of renewables (AFS).



Demand for Renewables from RFS and New Energy Bill – 2007 (in billion liters)

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Datagro



Limit to US Corn

• Depends on how much corn can be dedicated to ethanol, or, • How soon technologies for ethanol from cellulose become applicable.• 2006: 22% of all corn available in US, 53 million tons, is converted to

ethanol.• When production rises to 34 billion liters, corn use will be 90 million

tons, 37% of current supply.• Corn is also basic feedstock for:

– Glucose and fructose: +50% of US sweeteners– Key ingredient for cattle, pork and poultry feed– Industrial applications– Human food.

http://rickdykstra.ca/images/blog_images/ethanol.jpg



Limits to US corn• The ag frontier is determined by the

availability of water.• US has enough land – but no water.• Depletion of Ogallala aquifer,

largest groundwater reservoir, a prime example.

• Water from Ogallala mostly usedfor irrigation.

• At current rate, 6% of reserve usedevery 25 years, or 12 trillionliters/y.

• Biggest problem: no one reallyknows how long it will last.



Limits to US corn• Ethanol frenzy is already causing substitution of soy

land to corn.• Main factor behind recovery in soy and meat prices.• Ethanol is affecting world corn, soy, and meat prices.• Limit to US corn ethanol is related to what price of

corn will turn corn ethanol uncompetitive withgasoline. Nov/10/06 1995/96

Price of Corn (US$/bu) 3.40 5.50 Cost of corn ethanol (US$/gallon)

w/o recov.invest. 1.75 2.53 w/ recov. Invest. 2.00 2.78

Source: Datagro



Ethanol in Europe

• 2006: Production 4.64 billion liters, from 3.65 billionliters (2000).

2000 2006(estim.)

EU 2.41 3.40 France 0.81 0.95 Germany 0.29 0.75 Spain 0.15 0.46 U.K. 0.44 0.28 Poland 0.16 0.25

Russia 0.62 0.65 Ukraine 0.21 0.27 Others 0.41 0.28 EUROPE 3.65 4.60

Ethanol Production in Europe (million liters)Country

Bloc



Ethanol in Europe• EU reducing sugar exports by 6.2 million tons (7.5 -> 1.3 million tons).• Ethanol capacity expansion is by volume almost equivalent (6% higher) to that

equiv. amount of sugar: 4.1 billion liters.• France: 5.75% (2008)• Sweden: 5.75% (2006)• Germany: concentrated on ETBE, direct blending start in 2007.

Volume in million liters

EUFrance 1.20 Spain 0.88 Belgium 0.57 Netherlands 0.44 Germany 0.23 Austria 0.19 U.K. 0.19 Sweden 0.15

CountryBloc

EU Ethanol Capacity Expansion



Ethanol in Beneficiaries of PTA´s

• With the US– CBI– CAFTA

• With the EU– EBA– SD&G



PTA Beneficiaries with US

CBI• Free access to volume max. 7% of US ethanol

demand.• Mostly used for Brazilian ethanol dehydration, and in

the past EU wine ethanol.• Dehydration plants: Costa Rica, El Salvador, Jamaica.• Volumes:

– 2005: 354 million liters– 2006: 470 million liters– Window: 1,330 million liters (2007)



PTA Beneficiaries with US

CAFTA (signed Aug 04)• Duty free with no quantitative limitation.• Partners: Costa Rica, Dominican Rep., El Salvador,

Guatemala, Honduras, NIcaragua.• Most advanced: El Salvador.

– Sustained solution for local competition with gasoline, and relationship mills-cane suppliers.

– Drafted legislation.– Initiated investments.



PTA Beneficiaries with the EU

EU´s General System of Preferences• Everything But Arms Initiative, EBA (with 50 LDC´s)• Sustained Development and Governance Beneficiaries, SD&G

(14 countries, mostly in Latin America).

Non-beneficiaries import-duty• 19.2 cents Euro/liter undenatured• 10.2 cents Euro/liter denatured.



PTA Beneficiaries with the EU

Interest, and in some cases investments• EBA: Angola, Mozambique, Sudan, Tanzania,

Zambia.• SD&G: Bolivia, Colombia, Costa Rica,

Ecuador, El Salvador, Guatemala, Honduras, Panama, Peru.



Other Initiatives

• Argentina– 5% mandated blending of ethanol and biodiesel,

2010.– Market: 600 million liters ethanol/year– 2006: production 170 million liters.

• Canada– Expected to announce 5% ethanol mandate– Market: 2 billion liters ethanol/year,– 2006: production 580 million liters.



Ethanol in AsiaChina´s Production• 2006: 3.85 billion liters• 2000: 2.97 billion liters.• 18-20% of world´s corn, 143 million tons

(2006).• Corn demand rising rapidly = exports

diminishing.• Ethanol = 2% gasoline pool.



Ethanol in Asia

India• After many stops & goes, (re)introduction of

5% nationwide mandate, starting Oct/06.• Production to grow from 450 to 615 million

liters in 2007.



Ethanol in Asia

Thailand• Gasohol demand is rising• Ethanol demand (2006) 750 million liters.• Production (2006) 350 million liters.



Ethanol in Asia

Japan• PM Shinzo Abe instructed his government to take measures to

boost annual use of bio-ethanol to 6 billion liters, equivalent to 10 percent of current gasoline usage. In his words, "…to protect the environment, revitalize regional economies and energize agricultural activities, the government will work on lifting the proportion of biofuels in gasoline consumption."

• In spite of all the interest, it looks like Japan will go for now with:– 7% ETBE in 20% of gasoline (premium) = 320 million liters of ethanol

demand.



Markets are becoming interconnected

• Due to ethanol, prices of ag commodities are increasingly correlated to energy commodities,– via sugar, and – via corn.



Sugar and Petroleum: the ethanol link

0.010.020.030.040.050.060.070.080.0

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Oil (1º Fut Brent Crude) Sugar (1º Fut Nº 11)

US$/barril c/lb

Source: Datagro

Source: DATAGRO (www.datagro.com)

Jan/89 - Dec/98 1%Jan/99 - O ct/06 81%Jan/04 - O ct/06 85%

Correlation



Challenges – Corn Ethanol

• Ethanol demand is growing faster thanprojected expansion in corn productivity(+2.5% aa).

• Anything that can speed up this rate is welcomed.



Source: USDA Analysis: DATAGRO

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Bushels / Acre

Agricultural Yield – US Corn(1940 – 2006, in bushels/acre)

+2.51% a.a.



Challenges – Cane Ethanol• Use better sugar cane residues.• Ethanol from cellulose:

– Dedini (low acid conversion – DHR process): announced costof 27 cents US$/liter / immediate application;

– NREL (ex-SERI), (mixed acid-enzymatic conversion): costestimated to be equal to Brazil´s in 10 years. Cost of collection leads to need of further refining of technology, which could be implemented in Brazil due to low cost of collection.

– Cost of collection:• US$ 2.5 – 4 /GJ in Northern hemisphere countries (US$ 20-60/ton);• US$ 0/GJ for bagasse, and US$ 1/GJ for cane leaves in Brazil.



Comparative Costs

Country Assumption Ethanol Sugar(US$/liter) (US$/ton)

Brazil - CS Forex R$2.15/$ 0.298 177.2 USA Corn $2.1/bu 0.370 308.6 USA Corn $4.3/bu 0.581 345.6 USA Aver.cost fr cane 0.686 407.9 EU Average 1.278 760.0 EU Most efficient 0.908 540.0 Australia Average 0.395 235.0 Thailand Average 0.426 253.0 Guatemala Average 0.538 320.0 Source: Datagro

Comparative Average Cost ex-works - December 2006



Corn & Sugar Cane as FeedstocksMain elements CORN SUGAR CANEFeedstock starch sucroseAgrindustrial yield (liters/hectare) 3600 6100Energy Balance (ER) 1.3 8.9GHG emission saved (t CO2 eq/kl) 0.9 2.4GHG emission from bio-ethanol 1.9 0.4GHG emission from gasoline 2.8 2.8Competitiveness based on Price of corn Cost of cane

Price of crude Price of crudeForex

Production economics Optimized Not optimized(cane not fully

utilized yet)Future perspective fn of speed of rise fn of speed in

in corn productivity econ use of caneresidues

Limits to growth fn of availability of uses relativelyland & water little land

Food vs fuel increasingly a little impact issue from cane

Source: Datagro



Fuel Cells• Fuel cells with on-board reform may represent a great

opportunity for ethanol. Electric car using a liquid fuel.

• Internal combustion engine (thermodynamic efficiency):– Otto cycle, gasoline 26-28%– Otto cycle, ethanol 29-32%– Diesel cycle 34-36%

• Fuell cells: 55%-65%• Hydrogen:carbon ratio

– Methanol 4 : 1– Ethanol 3 : 1– Gasoline 1.83 : 1 (indolene)

Exothermic reactionHeavy materials



The Future• Ethanol has a brilliant future, due to the size of the world

fuels market, and its potential use not only in fuel, butalso petrochemical applications.

• Biomass ethanol increases accessibility & income in LDCs.

• Cane ethanol can extend the usage of grain (corn and wheat) ethanol beyond the food vs. fuel controversy.



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THE WORLD ETHANOL MARKET › download › foroglobalbioenerr... · 2018-12-01 · DATAGRO Sugar and...

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