Us Ethanol Industry Analysis

US Ethanol Industry Analysis
‐ Sri Krishna Consulting

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© 2012-20013, SKC. All rights reserved. This material is exclusive property of SKC. No part of this presentation may be used or shared or
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modified without explicit written permission of SKC.

Content
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No. 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

© Sri Krishna Consulting. Please write us for more information: info@srikrishnaconsulting.com |www.srikrishnaconsulting.com

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 of
ethanol 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 $200‐
gp ; g , g pp y$
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 the
two is in the initial treatment of the grain
grain.

3

Global Overview of Ethanol Production

Global Ethanol Production in 2011 (Millions Top Five Ethanol Producing Countries in
of Gallons) 2011 (Millions of Gallons)
Europe Asia Africa Australia European
5% 4% 0% 0% Union
China
h
5%
Canada 3%
2%

South
America
Brazil
26%
26%
North and
Central
America USA
65% 64%

American continent controls over USA is the top producer, Consumer
91% of world Ethanol production. and exporter of Ethanol. USA and
Brazil control over 90% of global
Ethanol production.

4

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
States with Ethanol Facility 29

Historical Ethanol Production (in Top 5 Ethanol Producing State (in
millions of gallons)
illi f ll ) millions of gallons)
millions of gallons)
16,000 4000
14,000 3500
12,000 3000
10,000 2500
8,000 2000
6,000 1500
4,000 1000
2,000 500
0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

5

US Ethanol Industry: Historical Growth

Production Capacity and Plant Capacity Expansion
16000 250 6000 80
14000 5000
70
12000
200 60
4000
10000
150 50
8000 3000 40
6000 100
2000
30
4000
50 20
2000 1000
10
0 0
0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ethanol Production Capacity (in millions
Ethanol Production Capacity (in millions
of gallons)
Total Ethanol Plants Capacity Under Construction/Expanding
(
(in millions of gallons)
g )
States with Ethanol Plants Plants Under Construction

6

Ethanol Production: Value Chain

Direct
Production
5 billion gross 13.9 billion
bushels of corn gallons of Ethanol
ll f Eth l
35.7 million metric tons of
distillers grains
Co‐
Products 39 2.9 million tons of corn gluten feed
million metric tons
of livestock feed.
0.6 million
tons of corn gluten meal
t f l t l

The average dry mill today uses less than 26,000 BTUs of thermal energy to produce a gallon of
ethanol, 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.

7

Ethanol Production Summary: 2011

Ethanol Production Gasoline Demand Ethanol Production % of
(
(1000s Gallons)
) (
(1000s Gallons)
) Gasoline Demand
(1000s Gallons)
1963122 19516350 10.05%

Corn Use Co‐Product Output (metric tons)
(1000s Bu
Used)
708709 Distillers Corn Gluten Corn Gluten Corn Oil (lbs.)
Grains Feed Meal
4674338 504404 93408 205063136

8

Ethanol Import and export

Ethanol Imports (in millions of Ethanol Exports (in millions of gallons)
gallons)
1200
700 1100
600
600 1000

500
435.2
435 2 800

400
600
300
396
193.7
193 7 400
200 160
200 150.2 157.7
100 113.3
10
0 0
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

9

SWOT Analysis: Strength

I. A good substitute of Gasoline: Ethanol is a major substitute of Gasoline. U.S. gasoline
consumption would drop by 12 percent for more use of Ethanol. The market for ethanol as a
direct gasoline substitute is small but growing rapidly. Stimulated by rising gasoline prices and
supported by federal, state, and local subsidies for alternative‐fuel vehicles and
infrastructure, 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 stations
nationwide. In 2007 to 2010, the share of ethanol in global gasoline type fuel use increased
from 3.7% to 7.4
II. Ethanol Reducing the dependency on imported oil: Ethanol remains the only domestic
renewable fuel that is meaningfully reducing America’s dependence on foreign oil. In
2011, 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 American
economy $49.7 billion.
III. Ethanol Reduces Air Pollution and Greenhouse Gas Emissions: Ethanol has a high octane
number 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 better
combustion. 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 ethanol
is 25% better than gasoline. Global warming is one of the prime aspects in evaluating
technologies and ethanol d
h l d h l does well in this regard. E10 reduces greenhouse gas emissions b
ll h d d h by
from 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. 10

SWOT Analysis: Weakness

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

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

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

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

11

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 and
newer, representing 62% of the light duty vehicles on the road today. A nationwide E15 market
would represent nearly 20 billion gallons of annual ethanol demand.

II. Increasing export: Ethanol is increasingly becoming a global commodity. Global ethanol
production and demand is way up, with the U.S. now the world’s top producer, consumer, and
exporter of fuel ethanol. 2011 was a record year for U.S. fuel exports. American producers sent
1.1 billion gallons of denatured and undenatured ethanol to overseas markets. Additional, The
US 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 a
wide range of choice of Ethanol blend from E10 to E85. Through the expanded installation of
blender pumps and a greater proliferation of flex fuel vehicles, higher level ethanol blends will
give consumers a real choice at the pump while making America less vulnerable to the vagaries
of the world oil market.

12
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SWOT Analysis: Threats

I. Lack of distribution infrastructure: Ethanol requires more specific distribution logistic as unlike
gasoline Ethanol cannot be distributed through pipeline. Lack of distribution infrastructure is
major 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 repeal
threat of the Florida Renewable Fuel Standard, anti‐ethanol interests are motivating their state
affiliates in an effort to dismantle domestic ethanol production from the ground up. Usage of
more 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. Heavy
demand for corn due to rising ethanol production is driving the cost of corn out of the
affordable range of common people. Food prices with energy/fuel prices that can create cross
market competition which drives food prices up.

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

13

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