October 22, 2004

China's Ethanol Plan Unlikely To Spur Corn Imports

With oil prices setting new records by the day, China is pushing for more ethanol-blended fuel at local gas stations to reduce its reliance on imported gasoline.

But the efforts are still limited and are unlikely to spur an immediate increase in the import of corn, a major feedstock for producing ethanol, analysts said Friday.

Ethanol is produced by fermenting agricultural crops such as corn and wheat.

It remains too expensive a proposition to make ethanol from imported corn in China, analysts said. Furthermore, rising freight rates this year and domestic transportation bottlenecks have made it unviable to import corn for producing ethanol.

However, while China's quest for alternative fuel may not spur corn imports in the near term, the country is expected to turn a significant corn importer in the long run. This is due to rising demand because of a steadily increasing per capita meat consumption that is boosting the need for feed as well as other industrial uses, analysts said.