ETHANOL
China, Canada and Brazil imported 67% of the ethanol shipped from the US through November 2016. The increase is driven largely by increased volumes to China and Brazil. China imported 179 million gallons through November, exceeding the 73.8 million gallons imported for all of 2015. There is a concern that China could raise ethanol tariffs and reduce imports in 2017 owing to a possible trade dispute with the new administration. The Chinese government did not list ethanol among the agricultural commodities to qualify for a preferential 5% tariff in 2017. US ethanol cargoes earmarked for China have already been cancelled, so barring further clarification from the Chinese government, it would appear that ethanol import tariffs could rise back to the normal 30% rate.
Still, Chinese ethanol production is booming. The attractiveness of processing for ethanol and starch has recently been increased by official subsidies that will most likely be extended. Chinese industrial use of grain, including ethanol, was up 3.7% in 2016/17 at 66.5 million tonnes. The Chinese government’s decision in March 2016 to end the “floor” price policy for corn, effectively a price support policy for corn producers, has caused artificially-elevated corn prices to sag. The old policy resulted in high corn stocks. In fact, Chinese corn ending stocks stand at 106 million metric tonnes, or 48% of the world’s total. A large percentage of these stocks are dated and are only good for industrial use. The Chinese have realised the best way to deplete excess stocks is by shifting the subsidies to the industrial use of corn, which will increase domestic ethanol use and reduce ethanol imports from the US.
5) China Ethanol Imports
80 70 60 50 40 30 20 10 0
Source: Bloomberg
Mark Bowman E:
info@hightowerreport.com T: 001 312 786-4450
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31 | ADMISI - The Ghost In The Machine | January/February 2017
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