11/09/2009
The economic outlook for the world bioethanol industry has improved considerably over the second half of 2009, according to Christoph Berg, managing director of F.O. Licht. Speaking at the opening of the F.O. Licht World Ethanol conference in Paris, Berg said there were several reasons for the more optimistic outlook at present, after a couple of years of relative gloom. He noted that grain prices were sharply lower, which meant cheaper feedstocks; issues of overcapacity had been addressed to some extent in surplus producing regions; world crude oil and gasoline values had made a substantial recovery, making biofuels more competitive again; and adverse weather conditions in Brazil greatly had reduced the supply of cane ethanol from that country.
For late 2009, the global fuel ethanol supply estimate for late 2009 is 18.1 billion gallons, while demand is seen at 18.0 billion gallons, leaving a world surplus of below 100 million gallons. The reduced surplus compared with previous years is mainly due to continuing tightness in Brazilian supply, according to Berg. For 2010, he assumes the current economic recovery continues, with global ethanol supply forecast to reach 20.4 billion gallons and demand at 20.2 billion gallons, leaving a larger surplus of 185 million gallons. Berg said that this assumes a recovery in Brazilian fuel ethanol supplies, based upon improved weather conditions.
In the United States, the market remains strong, with margins slowly improving despite economic difficulties. US fuel ethanol capacity is seen at 10.5 billion gallons this year, rising to 11.1 billion gallons in 2010, he said. Nevertheless, significant challenges remain, notably on sustainability issues such as carbon savings and indirect land use, which could be a make or break for the sector, Berg said. “These are highly political issues that must be handled carefully,” he added.