Industry forecast: ethanol price shocks could further exacerbate - ethanol, raw materials - the pharmaceutical industry

Industry forecast: ethanol price shocks could further exacerbate - ethanol

, raw materials - the pharmaceutical industry

While some methods to produce ethanol by fermentation factory conditions as poor earnings, while leaving aside the ambitious capacity expansion plans, but buyers were ethanol is no need to worry about a shortage of ethanol products. Analysts said that although the supply chain and logistics-related accidents from time to time there may be obstacles, but the market still there is enough supply of ethanol.

Over the past year, fuel level (fermentation) of ethanol and synthetic (petrochemical) ethanol price volatility. According to industry forecasts, this year the price of ethanol may be present turmoil further exacerbated the trend.

Houston PFC Energy, a fuel analyst NathanSchaffer reports that late last year, the production capacity of approximately 5.6 billion gallons of new or expanded ethanol fermentation project originally expected to be completed and commissioned in 2008. However, since the beginning of the fourth quarter of 2007, of which about a quarter of the expansion project has been delayed or stopped. Schaffer will halt the project due to the industry's profits had been squeezed, and this is caused by two factors: First, the main raw material used to produce ethanol, corn prices increased significantly; Second, ethanol prices in 2007 Most of the time are on the decline.

If the economic situation improved, a number of ethanol projects standstill may be quickly restarted. However, Minneapolis, DTN's a bio-fuel analyst RickKment, taking into account the entire ethanol industry is expected to lower profits, he can not be sure whether these projects will be delayed into production this year.

However, even though some producers in the expansion has been backing out, but the fermentation of ethanol production capacity is still increasing rapidly. Houston, president of market research firm LipowOilAssociates AndyLipow estimated in early 2008, the United States in ethanol production capacity of about 8 billion gallons, but to the end of the year, this figure should be expanded to 13 billion gallons or so.

Not only in the United States a substantial increase in ethanol production this summer, from Brazil and the Caribbean ethanol imports also contributed to the severity, it is because those areas this year will usher in a very good sugar cane harvest (fermented sugar cane ethanol production another material).

Overall, the upcoming production of ethanol production capacity to exceed market demand. Therefore, AndyLipow of the view that buyers, this year's ethanol supply will not be a problem, the overall supply of ethanol will be adequate.

At the same time, the demand for ethanol continues to maintain its high growth trend. According to data provided RenewableFuelsAssociation, 2007, the U.S. consumed about 62 billion gallons of ethanol, an increase of 15% over the previous year. Alcohol consumption should be expected to accelerate growth, it is because last year in December, the U.S. federal government enacted the "Energy Independence and Security Act", the bill requires that by 2022, U.S. ethanol output to reach 36 billion gallons of target value.

Demand also affected prices of fuel-grade ethanol stimulation. Last year early in October, the major markets in the Midwest, the price of fuel-grade ethanol fell 1.60 U.S. dollars / gallon less, but the beginning of the year at around 2.40 U.S. dollars / gallon. This increased the price of gasoline and ethanol gap between the making of gasoline mixed with ethanol than pure gasoline cheaper.

The past few months, some parts of the western United States the demand for ethanol is rising. The reason is, Phoenix, Las Vegas and Denver and other cities requested time during the winter months to increase gasoline mixed with ethanol supply of products to reduce carbon monoxide emissions.

All of these affect the supply of and demand for ethanol, the short-and long-term fluctuations of the prices of ethanol a rather complex movements. With the 2007 ethanol prices lower, the fuel mixture to stimulate the industry, the demand for such products, fermentation ethanol prices began rising again. However, since about December last year, ethanol prices have been going down, experts say, this trend appears to be due to new ethanol production capacity has recently began to put into production.

At the same time, in recent months, from the petrochemical ethylene refining ethanol made of synthetic crude oil prices basically follow the path and go up.

The future will be volatile ethanol market supply and demand of products can not be achieved in parallel caused. Experts say the increased demand for ethanol will likely push prices higher, to stimulate the ethanol that stalled the project to restart, which will increase the supply of ethanol. This capacity expansion will allow market supply and demand imbalance, prices fell again prompted to enter the next price cycle. At the same time, ethanol imports and the time to break this balance and may affect the rate of ethanol price shocks.

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