Us Ethanol Industry Analysis

US Ethanol Industry Analysis‐ Sri Krishna Consulting

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ContentThis sample is an abridged version of a Customized project done for one of our clients To protect ourThis sample is an abridged version of a Customized project done for one of our clients. To protect ourclient’s interests, several important data points, analysis and key recommendations have not been includedin this document.For more information about this sample and our other services, please write [email protected] Our Website:www.srikrishnaconsulting.com

No. Topic SlideNo. Topic Slide

1. Ethanol Basic 3

2. Global Overview of Ethanol Production 4

3. Ethanol Production Statistics 5

4. US Ethanol Industry: Historical Growth 6

5. Ethanol Production: Value Chain 7

6. Ethanol Production Summary: 2011 8

7. Ethanol Import and export 9

8. SWOT Analysis: Strength (Partial…) 10

9. SWOT Analysis: Weakness (Partial…) 11

10. SWOT Analysis: Opportunity (Partial…) 12

11. SWOT Analysis: Threats(Partial…) 13

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Basics of Ethanol

Ethanol is a renewable fuel made from various plant materials. The use of ethanol is widespread‐almost 95% of gasoline in the U.S. contains ethanol in a low‐level blend or E10 ethanol blends (10%ethanol). More than 9 million consumers driving flex‐fuel vehicles, or FFVs, can use any blend ofethanol from E10 up to E85 (85% ethanol).

Facts:

Ethanol reduces Gasoline usage and dependency on imported oil.It helps to reduce dangerous emission caused by gasoline.It helps to improve engine performance. Ethanol has octane rating of 113.Lowering petroleum cost; According to RFA, American household is saving approximately $200‐g p ; g , g pp y $

400 per year on gasoline because of ethanol's inclusion in the U.S. fuel supply.Ethanol also helps in creating domestic job. According to RFA, in 2011, the U.S. ethanol industry

supported 90,200 direct jobs and 311,400 indirect jobs all across the country.

Ethanol Manufacturing Process:

There are two production processes: wet milling and dry milling. The main difference between thetwo is in the initial treatment of the graintwo is in the initial treatment of the grain.

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Global Overview of Ethanol Production

Europe5%

Asia4%

Africa0%

Australia0%

Global Ethanol Production in 2011 (Millions of Gallons)

h

European Union

Top Five Ethanol Producing Countries in 2011 (Millions of Gallons)

5% 4% 0% 0%

Canada2%

China3%

Union5%

North and Central

South America26%

USA

Brazil26%

America65%

USA64%

American continent controls over91% of world Ethanol production.

USA is the top producer, Consumerand exporter of Ethanol. USA andBrazil control over 90% of globalEthanol production.Ethanol production.


Ethanol Production Statistics

Key Production Statistics

Number of Operating Plants 209

Production Capacity 14.9 billion gallons

Capacity under Construction 140 million gallons

States with Ethanol Facility 29States with Ethanol Facility 29

Top 5 Ethanol Producing State (in millions of gallons)

Historical Ethanol Production (in illi f ll )

20002500300035004000

millions of gallons)

10,00012,00014,00016,000

millions of gallons)

0500100015002000

02,0004,0006,0008,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011


US Ethanol Industry: Historical Growth

25016000

Production Capacity and Plant806000

Capacity Expansion

150

200

8000

10000

12000

14000

506070

4000

5000

50

100

2000

4000

6000

8000

10203040

1000

2000

3000

00

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Ethanol Production Capacity (in millions

010

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Ethanol Production Capacity (in millions of gallons)

Total Ethanol Plants Capacity Under Construction/Expanding (in millions of gallons)

States with Ethanol Plants( g )

Plants Under Construction


Ethanol Production: Value Chain

5 billion gross 13.9 billionll f Eth l

Direct Production

bushels of corn gallons of Ethanol

35.7 million metric tons ofdistillers grains

Co‐39

million metric tons of livestock feed.

2.9 million tons of corn gluten feed

0.6 milliont f l t l

Products

tons of corn gluten meal

The average dry mill today uses less than 26,000 BTUs of thermal energy to produce a gallon ofethanol, compared to the 77,000 BTUs of energy contained in the gallon.The average dry mill ethanol bio‐refinery uses 47% less water per gallon than in 2001.Ethanol yields between 1.9 and 2.3 units of energy for every one unit of energy used in

production, according to USDA research.


Ethanol Production Summary: 2011

Ethanol Production(1000s Gallons)

Gasoline Demand(1000s Gallons)

Ethanol Production % of Gasoline Demand( ) ( )(1000s Gallons)

1963122 19516350 10.05%

Corn Use(1000s Bu Used)

Co‐Product Output (metric tons)

708709 Distillers Grains

Corn Gluten Feed

Corn Gluten Meal

Corn Oil (lbs.)

4674338 504404 93408 205063136


Ethanol Import and export

700

Ethanol Imports (in millions of gallons)

11001200

Ethanol Exports (in millions of gallons)

435 2

600

500

600

700 1100

800

1000

435.2

193 7

300

400

396400

600

800

193.7

10

160

0

100

200

150.2 157.7113.3

0

200

400

0

2007 2008 2009 2010 2011

0

2007 2008 2009 2010 2011


SWOT Analysis: Strength

I. A good substitute of Gasoline: Ethanol is a major substitute of Gasoline. U.S. gasolineconsumption would drop by 12 percent for more use of Ethanol. The market for ethanol as adirect gasoline substitute is small but growing rapidly. Stimulated by rising gasoline prices andsupported by federal, state, and local subsidies for alternative‐fuel vehicles andinfrastructure, the number of retail stations offering E85—an alternative fuel blend of 85%ethanol and 15% gasoline—more than doubled during 2006–2009 to over 1900 stationsnationwide. In 2007 to 2010, the share of ethanol in global gasoline type fuel use increasedfrom 3.7% to 7.4

II. Ethanol Reducing the dependency on imported oil: Ethanol remains the only domesticrenewable fuel that is meaningfully reducing America’s dependence on foreign oil. In2011, American ethanol use helped reduce the need for imported oil by 485 million barrels.That is roughly the equivalent of 13% of total U.S. crude oil imports, saving the Americaneconomy $49.7 billion.

III. Ethanol Reduces Air Pollution and Greenhouse Gas Emissions: Ethanol has a high octanenumber which causes it to burn in a greener way, i.e. more efficiently causing less pollution.Ethanol was primarily used as an additive in gasoline to increase its octane number for bettercombustion. Corn ethanol reduces GHG emissions by 30‐50% compared to average gasoline.Even when hypothetical land use change emissions are included, today’s average corn ethanolis 25% better than gasoline. Global warming is one of the prime aspects in evaluating

h l d h l d ll h d d h btechnologies and ethanol does well in this regard. E10 reduces greenhouse gas emissions byfrom zero to 5 percent and pure ethanol by 12 percent. Ethanol help reduce the use of cancer‐causing gasoline compounds such as benzene, toluene, xylene, and ethyl benzene.


SWOT Analysis: Weakness

I. Less availability of ethanol filling stations: Ethanol technology is that E85 fuel is not easilyavailable in USA. E85 is available at nearly 2,000 locations nationwide. These stations aremainly located around the corn fields in the Midwest or near other areas with ethanolproduction as c compared with 160,000 retail gasoline stations across the country, the overallnumber of stations offering E85 is low.

II. High vapor pressures: E85 fuel which is a blend of 85% ethanol and 15% gasoline has higheremissions of volatile organic vapors. Combustion of ethanol releases more organic vapors likeacetaldehyde, formaldehyde compared to gasoline.

III. Lack of pan America presence: Only 29 states produce Ethanol, so pan America Ethanolpresence is challenging due to anti‐ethanol movement.

IV. High distribution cost: Unlike gasoline, ethanol can’t be transported via pipeline since it picksup excess water and impurities along the line causing it to degrade. It has to be transportedthrough trucks and barge making it very expensive.


SWOT Analysis: Opportunity

I. Expanding domestic market: In January 2011, the U.S. Environmental Protection Agency (EPA)approved the use of E15 (15% ethanol, 85% gasoline) fuel in vehicles models of year 2001 andnewer, representing 62% of the light duty vehicles on the road today. A nationwide E15 marketwould represent nearly 20 billion gallons of annual ethanol demand.

II. Increasing export: Ethanol is increasingly becoming a global commodity. Global ethanolproduction and demand is way up, with the U.S. now the world’s top producer, consumer, andexporter of fuel ethanol. 2011 was a record year for U.S. fuel exports. American producers sent1.1 billion gallons of denatured and undenatured ethanol to overseas markets. Additional, TheUS exported approx 8 million metric tons of live stock feed, a co‐product of Ethanol.

III. New distribution infrastructure: Blend Your Own (BYO) campaign gives American drivers awide range of choice of Ethanol blend from E10 to E85. Through the expanded installation ofblender pumps and a greater proliferation of flex fuel vehicles, higher level ethanol blends willgive consumers a real choice at the pump while making America less vulnerable to the vagariesof the world oil market.


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SWOT Analysis: Threats

I. Lack of distribution infrastructure: Ethanol requires more specific distribution logistic as unlikegasoline Ethanol cannot be distributed through pipeline. Lack of distribution infrastructure ismajor challenge for Ethanol industry.

II. Anti‐ Ethanol movement: Anti ethanol movement is also effecting the Ethanol industry growth.From efforts to ban ethanol in New Hampshire to labeling concerns in Nebraska to a repealthreat of the Florida Renewable Fuel Standard, anti‐ethanol interests are motivating their stateaffiliates in an effort to dismantle domestic ethanol production from the ground up. Usage ofmore corn and water for Ethanol production is creating more buzz for anti ethanol interest.

III. Increasing corn price: Another threat to this technology is the increasing price of corn. Heavydemand for corn due to rising ethanol production is driving the cost of corn out of theaffordable range of common people. Food prices with energy/fuel prices that can create crossmarket competition which drives food prices up.

IV. Threats from European Union: The most pressing trade issue for U.S. ethanol producers andmarketers is the antidumping and countervailing duties investigations initiated by the EuropeanCommission (EC). This is an important issue for U.S. ethanol producers as export markets haveemerged as welcomed opportunities for domestically produced ethanol.


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