News
05.06.2009
Food Debate Hits EU Ethanol Harder than Crisis
The financial crisis that dried up credit everywhere hit the global biofuel industry hard but the fuel-versus-food debate last year did even more damage to the European ethanol sector, the block's largest ethanol association said on Wednesday.
The industry, which now struggles against overcapacity and falling demand for biofuels, will be able to "easily" supply the local market until the end of 2011.
"I believe the impact of the food-fuel debate was bigger on our industry than the crisis right now," the general-secretary of the European Bioethanol Fuel Association, Rob Vierhout, told Reuters on the sidelines of the Ethanol Summit.
"In Brazil, the investments stopped because the lack of funds (due to the crisis). The investments stopped in Europe because lack of political reliability," he said.
As commodities such as corn hit record prices in mid-2008, many around the world started to blame ethanol production as the main driver for grain prices.
Ethanol is made primarily from sugar cane in Brazil and corn in the United States.
Mr Vierhout said he does not see investments in the sector picking up again before late next year or 2011. But until then, local supplies will be more than enough to address the local demand, in part, because several new plants are expected to come on-line.
"We can easily supply the market until the end of 2011 ... I don't think there is a huge demand for investors," he said.
Imports from Brazil, the world's largest ethanol exporter, are expected to drop this year, possibly to around 1 billion liters, compared with 1.5 billion liters in 2008.
"There's simply too much ethanol around in Europe," Vierhout said, adding the situation got so bad that major oil companies, which are usually consumers of the fuel, are selling ethanol locally to other oil companies or independent blenders.
"They had bought so much that now they're selling on the market, and they're selling for very, very low prices. I'm pretty sure they're losing money," he said.
The European Union has set a mandatory target of getting one-fifth of its energy from renewable sources by 2020. Countries intend to gradually raise the content of biofuels in fossil fuels but these are not obligatory requirements.
"Ethanol exports (to Europe) in 2010 would depend on demand. If crude goes up to $100 (per barrel), ethanol would be an attractive component," said Mr Vierhout, adding current oil prices of around $60 a barrel were not enough.
"Until then, it's going to be a difficult market."
TheBioenergySite
