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Green Plains warns on cellulosic ethanol, after sector suffers two plant closures

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The high costs of building cellulosic ethanol plants, of which two closures were revealed in one day, make them a “hard equation” to justify, Green Plains Ethanol said – as it noted too talk of China reopening to US exports of the biofuel.


Todd Becker, the Green Plains chief executive, said that the US-based biofuels producer “did not spend any time on” investigating investment in so-called cellulosic ethanol, manufactured from waste such as corn stover.


“Nor do we plan to in the future,” he told investors, saying that a “major [cellulosic ethanol] plant is a hard thing to accomplish and be competitive” with biofuel produced.


‘Hard equation’


There was a “lot of money being spent” on the advanced ethanol plants, which are viewed by many as socially beneficial in converting plant waste, rather than food grains, into biofuel.


Investors have spent the equivalent of “$10-15 a gallon trying to get these plants up and running”, Mr Becker said.


“You could build a new corn-based ethanol plant for $1.80 a gallon.”


Developing a cellulosic ethanol plant was “a hard equation, and it’s a long road”.


Double whammy


The comments followed a double whammy for the cellulosic ethanol industry, with DowDuPont revealing it is to sell a $225m facility in Iowa, the top US corn-growing state, after two years of operation and reports in Italy of a the Beta Renewables plant in Piedmont being shut down.


DowDuPont, formed in August from a merger of Dow Chemical and Dupont, said that as part of its “intent to create a leading specialty products company, we are making a strategic shift in how we participate in the cellulosic biofuels market.


“While we still believe in the future of cellulosic biofuels, we have concluded it is in our long-term interest to find a strategic buyer for our technology including the Nevada, Iowa, biorefinery,” which local reports say has been shut down while an acquirer is found.


DuPont two years ago closed a cellulosic ethanol plant in Tennessee “in an effort to streamline operations”, saying that its “core mission” in the sector “has been fulfilled, as demonstrated by DuPont’s recently opened 30m gallon-per-year cellulosic ethanol facility in Nevada, Iowa”.


Chinese market to reopen?


Mr Becker also backed ideas raised earlier this week by Juan Luciano, the chief executive of corn processor-to-grain trading giant Archer Daniels Midland, that the US could see a revival in ethanol exports to China which have slumped since Beijing removed a preferential import tariff.


China’s ethanol imports for the first nine months of 2017, at 7,304 litres, were down 99% year on year, customs data showed.


Imports from the US slumped to 65 cubic metres, from 667,165 cubic metres in the same period of last year.


‘We’re hearing rumours…’


“Our intelligence says, there’s somewhere in the range of nine operating ethanol plants in China that today are producing about 650m gallons” of the biofuel, although with capacity for 1bn gallons, he said.


Yet China’s plans to roll out E10 – ethanol blended into gasoline at a rate of 10% - by 2020 would produce 3.5bn-4bn gallons of demand.


With such a disparity between output and demand, “there is an opportunity for the US to participate in that market and provide them product”, with current pricing making US supplies “competitive into China” in some areas, even factoring in the import duty of 30%.


“And so what we’re seeing today is a lot of talk, a little bit of interest. We’re hearing rumours that some business could be getting done.”

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