September 18, 2006

 

China's insatiable appetite for ethanol to create greater demand for corn

 

 

China plans to increase its production of ethanol to 6.25 billion liters a year by the end of this decade, China National Grain & Oils Information Centre said Monday (Sep 18).

 

The projected rise in ethanol output is expected to result in soaring demand for corn, analysts said.

 

1 tonne of corn can be processed into about 400 litres of ethanol.

 

China's four major ethanol producers - Jilin Fuel Alcohol Co., Heilongjiang China Resources Alcohol Co., Anhui Fengyuan Biochemical Co. and Henan Tianguan Fuel Ethanol Co. have a combined output of 1.28 billion litres of ethanol annually.

 

This means China's government wants a five-fold increase in its ethanol output in the next 4 years.

 

China National Petroleum Corp. (CNPC.YY) and China Petroleum & Chemical Corp. (SNP), also known as Sinopec Corp. - two major marketers of fuel ethanol - have jointly invested RMB1.21 billion (US$152.2 million) to build 147 ethanol distribution centres across the country over past five years, the CNGOIC said.

 

The government has been promoting the use of ethanol-blended gasoline in vehicles, in the hopes of reducing the country's reliance on crude oil and improving the environment, by offering subsidies and tax benefits.

 

The four ethanol makers receive subsidies and benefits, including a waiver of the 5 percent consumption tax and tax rebates.

 

Ex-factory prices of fuel ethanol are quoted near RMB 4,700/tonne (US$591.5) in China.

 

China's corn output is expected to hit 141 million tonnes in the 2006/2007 market year, which runs from October to September, up from 139.4 million tonnes in 2005/2006, according to CNGOIC.