Asian Doors Open Slowly to U.S. Ethanol
Earlier this year, ethanol and grain promotion groups applauded a decision by Japan’s government to allow U.S. ethanol to be used to make ETBE, an oxygenate blended into fuel used in that country’s cities.
Japan decided that American ethanol has a small enough carbon footprint that it can be used in up to 44% of Japan’s ETBE, which has the potential to be a 95.5-million-gallon market for U.S. ethanol producers. That represents about 7% of nearly 1.4 billion gallons of ethanol exported in the most recent grain marketing year.
So far, though, U.S. ethanol isn’t going to Japan.
“We know that there’s no actual commercial shipments of U.S. ethanol happening yet,” said Tetsuo “Tommy” Hamamoto, Japan director for the U.S. Grains Council.
Hamamoto, who is based in Tokyo, was in Johnston, Iowa, Friday, accompanying a delegation of high-level government and industry representatives from Korea, Taiwan, China, and Japan. The group stopped at the Iowa Corn Growers offices before visiting a fuel terminal, co-op, and farm.
Hamamoto estimates that it will take a year or two for U.S. ethanol to enter the Japanese market.
“The buyer is the Japanese petroleum industry. They will decide what they’ll do,” he said. “It will take time to set up commercial practices.”
Unlike the U.S., Japan has no mandate to blend ethanol, but the industry is already meeting the government’s target volume of 217 million gallons of ethanol used annually. The U.S. is likely to replace 44% of that over time.
The amount of ETBE used in Japan varies across the country, but its equivalent in ethanol amounts to about 3% of gasoline usage, or E10. That doesn’t mean the market is capped at that level, he said. The Grains Council is working with the Japanese government to show the environmental and health benefits of blending ethanol directly into gasoline at a higher level such as E10, or 10% ethanol.
Japan is just one of several large potential markets for exports of U.S. ethanol.
One of the largest is China, which aims to transition to E10 by 2020, creating a 4-billion-gallon ethanol market.
The U.S. has competitors in the region, including Pakistan and ethanol made from sugarcane in Indonesia.
Yet, ethanol from the United States often has a price advantage.
“U.S. ethanol is by far economically competitive,” said Tim Tierney, a Grains Council regional director based in Singapore who was also accompanying the group of visitors.
Even with a 45% tariff that China has placed on U.S. ethanol, it would be economically competitive in that country, Tierney said. But Chinese importers have been reluctant to buy under the current uncertainty about trade between the U.S. and China.
Meanwhile, the U.S. Grains Council is helping show the Chinese the best practices for ethanol usage and explaining how the Renewable Fuel Standard works in the U.S. as a blending mandate, Tierney said.
China’s goal is to be self-sufficient in ethanol production but U.S. ethanol could fill in gaps as it moves toward E10, according to some analysts.
“U.S. ethanol still is in the embryonic stage of exporting to Asia,” Tierney said.