China’s quest for clearer skies has produced two unlikely winners — the corn and sugar industries.
Ethanol, an alcohol made from biomass like corn and sugarcane, is mixed into gasoline to cut car emissions and reduce air pollution. China announced in 2017 that it will require all gasoline supplies to be blended with 10 percent ethanol by 2020. This fuel blend, known as E10, will boost the country’s ethanol imports and consequently raise demand for corn and sugarcane.
“To meet the mandate, China’s fuel ethanol consumption will have to go up to 15.1 billion liters per year, (equivalent to) 15 percent of global fuel ethanol production. So the mandate can potentially have a big impact on the global market,” said Zhang Wendong, assistant professor in the Department of Economics at Iowa State University, in the United States. Zhang estimated that China’s current ethanol production is now at 3.8 billion liters, with local corn and cassava used as feedstock. The push to use more E10 would require China to significantly increase its grain production.
The US Department of Agriculture said China would need 36 million tons of corn feedstock to produce 15.2 billion liters of fuel ethanol. The USDA calculation is based on data from the National Bureau of Statistics of China that show China’s total gasoline use hit 120 million tons in 2016 (equivalent to 120 billion liters).
“But given the country’s limited arable land, its pursuit of food self-sufficiency, and its growing demand for livestock feed, China cannot produce enough grains to meet the mandate,” Zhang said. He said China will need to turn to ethanol exporters like the US and Brazil.
In its latest global outlook, the United Nations Food and Agriculture Organization said China is among nations that will drive a rise in ethanol use in the next few years.
According to the OECD-FAO Agricultural Outlook 2018-27, China by 2027 must produce at least 29 million tons of corn and maintain a 70-million-ton stockpile to meet E10 demand. That calculation is based on the assumption that China would meet demand through local supply.
Lin Meijie and Echo Yue, ethanol analysts at SCI, a Shandong-based commodities market intelligence firm, forecast that China’s ethanol demand will jump from the current 3 million tons to 10 million tons by 2020. They said with local supply tight, China will likely import more from the US, Brazil and Pakistan.
HONG KONG NEWS