World Ethanol Production 2001

By Dr. Christoph Berg
July 31st, 2001

Our special thanks are due to Dr. Berg, commodity analyst and author of F.O. Licht's International Molasses and Alcohol Report and World Ethanol Markets, Analysis and Outlook, for allowing us to publish this review online. F.O. Licht may be contacted at:


UK Office:
80 Calverley Road,
Tunbridge Wells,
Kent, TN1 2UN,
Telephone: +44-1892-533813
Fax: +44-1892-544895


  Germany Office:
P.O. Box 1220,
23909 Ratzeburg,
Telephone: +49-4541-88920
Fax: +49-4541-82145

The outlook for world ethanol production in 2001 is for a strong rebound after several years of decline. Overall output is forecast to reach 31.4 bln litres compared with 29.9 bln in 2000 and 31.1 bln in 1999. Nevertheless, the world total is still below the all-time high reached in 1997, when a total of 33.0 bln litres were produced. Even though the bulk of production still comes from Brazil and the USA, two countries with an elaborate fuel ethanol program, there are interesting developments in other countries as well. Some of these could result in new production centres being established beside the traditional ones in the western hemisphere.
The most important development from a global point of view is probably the fact that Brazil could lose its dominant role as a producer and user of ethanol over the next couple of years. If California should indeed ban all MTBE in 2003, as is currently required by executive order, ethanol demand will rise sharply and the US could overtake Brazil by the year 2004, if not earlier.
Sizeable new production centres could emerge in Thailand, where the government plans to produce up to 650 mln litres of fuel ethanol by 2003, as well as China, where recently announced projects could raise fuel ethanol production capacity to 1.6 mln tonnes (roughly two bln litres) a year. In addition, new synthetic ethanol capacity could come on stream by 2005. For Europe, no such fixed production targets exist but there are increasing indications that the Commission is working on provisions for a Renewable Fuels Standard, securing a rising market share for bio-fuels.
It remains to be seen whether all these new developments in the field of fuel ethanol will help to redefine the world market. There are some quarters that seek to establish fuel ethanol as an energy commodity, just like gasoline or diesel. There is some likelihood that this plan will be successfully implemented, once all these ambitious fuel ethanol programmes, which have been announced over the last two years, are put in place. In this case, the world market would have enough liquidity to facilitate a transparent price formation process and, as a result, attract the interest of the players involved. In fact, this instrument could have positive repercussions on use and production world-wide. If the burden of fuel ethanol production is shared by a sufficient number of producers, crop shortfalls in a specific country need not necessarily disrupt supplies, as these could be sourced from elsewhere. Therefore, consumption patterns could stabilise and help to increase the attractiveness of fuel ethanol as a renewable source of energy. However, before this happens, the new projects need to get off the ground, requiring large investments and substantial adaptation of existing infrastructures. The challenge ahead is enormous and it may take longer than planned to achieve the set goals. However, one thing is certain, the outlook for fuel ethanol has never been brighter.

World Ethanol Production


The Americas - engine of growth

The Americas continue to be the leading ethanol producing continent and there is no indication that this will change in the foreseeable future. Total production in 2001 is forecast to reach 20.6 bln litres, up from 19.5 bln in 2000. This is equivalent to around 66 per cent of world output. The world leader continues to be Brazil, where output for 2001 is forecast to reach 11.9 bln litres compared with a revised 2000 estimate of 11.4 bln. The downturn in production in 2000 was mainly the result of a sharply reduced cane crop in the main growing region of the Centre/South. Alcohol prices, on the other hand, were quite attractive. The value of cane, if used for anhydrous alcohol production, was at par with sugar produced for the domestic and the export markets until February 2001. After that, alcohol values on the domestic market weakened and, as a result, the value of cane for this use also dropped. It is not yet clear what consequences arise from this deterioration in the economic position. Most market observers still believe that the higher cane crop, together with the increase in the amount of anhydrous alcohol blended with gasoline, could prompt overall production to go up. However, sharply higher export values for sugar (particularly in the wake of the weakening Real) have meant that millers produce as much sugar for export as possible. Given the outlook of another world sugar deficit in 2001/02, this strategy might be pursued by the industry for the next couple of months. This, in turn, could put pressure on cane supplies for alcohol production.
Longer term, the fate of the Brazilian alcohol industry will mostly depend on the development of demand for anhydrous alcohol. The production of hydrous alcohol is expected to fall further, as scrapping rates for old ethanol-powered vehicles are still exceeding new sales by a large margin. Even the sharp rise in gasoline prices over the last couple of months has not changed that. If the government wants to continue to support a large number of cars with a dedicated alcohol engine, it will have to revive its plan for a "green" fleet. This fleet could comprise taxis, official cars or busses. However, so far the government seems to be reluctant to commit itself to this question.
Anhydrous alcohol production on the other hand is likely to grow further, as long as the government maintains its blending provisions. At the moment, there is no indication that there will be a change in strategy. Even though the share of alcohol in the fuel mix in the transportation sector has been declining over the last couple of years, it still represents a substantial chunk of overall supplies. Brazil may become increasingly independent of gasoline imports but ethanol has made a valuable contribution to the development of the country's agro-industry. Moreover, the addition of alcohol seems to have supported the combat against air pollution in such mega-cities as Sao Paulo. Most analysts believe that anhydrous alcohol production will more and more crowd out hydrous alcohol in the fuel market, until the latter is completely phased out within a decade. On the other hand, all these long-term studies do not project a strong increase in overall alcohol production.

Brazil - The Value of Cane for Various Uses

This is why it can be anticipated that the USA will overtake Brazil in the near future. After the decision by the Bush administration to deny California an oxygenate waiver, fuel ethanol production in the United States is expected to grow strongly. According to the Renewable Fuels Association, by the end of 2003, US ethanol production capacity will reach 3.5 bln gallons (13.25 bln litres) a year, 1.5 bln gallons more than in 2001.
At present, California uses 3.8 bln gallons of MTBE, compared with 4.5 bln used in the whole of the US. MTBE, like ethanol, is an oxygenate, which helps reformulated gasoline to burn more cleanly. Under federal law, in urban areas with the worst pollution - like many Californian cities - RFG must contain at least two per cent oxygen by weight. This requirement applies to about 70 per cent of the gasoline sold in California.
The switchover to ethanol could prove to be a logistical nightmare. Apart from all the efforts by the ethanol industry to prove that it can produce the quantity required, the question of how the product will be transported to customers in California is still largely unresolved. Ethanol is a solvent and has an affinity for water. Therefore it is not suitable for transport in pipelines (the most cost-effective means of transport). Instead, there are two alternatives, namely either by truck and railcar directly to terminals in California, or by barge to the US Gulf coast and then via tanker vessels to the Californian coast.

USA - Fuel Ethanol vs. MTBE

It is not only the chemical properties which make the pipeline option unviable. Liquids that move through pipelines flow from one terminal to another in 800,000 gallon-quantities. There is not one ethanol plant big enough to make it worthwhile to ship by pipeline. Major ethanol companies have also begun to acquire storage facilities at the Los Angeles ports to handle ethanol that will go down the Missouri and Mississippi rivers by barge and then by ship through the Panama Canal. Railroads will also face limitations because of unloading facilities. Up to now, pipelines have been the main mode of transporting petroleum to California, and therefore the state is short of above-ground facilities to unload, store and distribute ethanol. According to industry sources, California is likely to use 61 railcar loads of ethanol a day. These would be delivered in 110 car trains, but so far the state does not have the facilities to handle these trains.
However, there is serious opposition to the ethanol option. MTBE producers fear loss of market share and revenue and refiners are concerned about the technical challenge ethanol may pose for their infrastructure. There is even criticism from environmentalist quarters, which charge that the increased use of ethanol could increase the state's smog level during hot summer months. The critics charge that while ethanol is successfully reducing carbon dioxide and carbon monoxide emissions, recent studies have shown that it could increase emissions of nitrogen oxides and volatile organic compounds (VOC), two leading components of smog.
According to Governor Gray Davies, the decision to introduce ethanol in California on a large scale will mean that the citizens in the state will pay at least two to three cents/gallon more for gas, or $450 mln/year after 2003, when the rule is set to go into effect. California consumes about 14.5 bln gallons of gasoline a year, more than any other state. So far, there are only two ethanol producers in California, Cucamonga and Corona. Cucamonga produces ethanol from beer waste, while the Corona plant uses cheese waste. Combined, these two plants produce only about four mln gallons of ethanol a year, somewhat more than half a per cent of prospective needs.
Canada is also in the process of greatly expanding its ethanol production capacity. The total for 2001 is forecast to reach 238 mln litres, unchanged from last year, but more than twice the amount produced in 1997. For 2002, the Canadian Renewable Fuels Association (CRFA) forecasts a rise to 358 mln litres, as several new projects are expected to start operating by then. For example, the Seaway Valley Farmers Energy Cooperative is building a C$48 mln ethanol production facility in Cornwall. The plant, scheduled to open in 2002, is expected to have an annual capacity of more than 60 mln litres. Likewise, a C$100 mln plant in Varennes is expected to start producing in 2002. Commercial Alcohols will operate the 120 mln litre-facility. Longer term, output could rise to as much as 750 mln litres, boosted by the government's Action Plan 2000 on Climate Change. The government supports the ethanol industry with a C$0.10 per litre-exemption on federal excise taxes for the ethanol portion of blended fuels. The regular excise tax on gasoline is currently standing at C$0.147 per litre. Canadians very much welcome the green fuel as recent polls show. Nearly 80 per cent of Ontarians would be willing to use ethanol in their cars, Oracepoll Research found out.

World Fuel Ethanol Production

EU lacks coherent biofuel strategy but production grows anyway...

Unlike their counter-parts in the US, Brazil or Canada the EU lacks a coherent biofuel strategy which, many believe, is a major reason for the industry remaining well below its true potential. However, even though bioethanol plays a smaller role than in the Americas, it is likely to grow with several projects under way.
Spain is said to become the largest bioethanol producer in the EU by 2004, when the third and largest plant will come on stream in Salamanca. So far, one bioethanol plant is up and running in Cartagena with a total capacity of one mln hl a year. A second one is to start operations in the first quarter of 2002 in Galicia. Production capacity there is 1.26 mln hl. Finally, the Salamanca plant will have a production capacity of two mln hl. This plant will use biomass as feedstock and, if successful, would be the largest ethanol plant employing such a production process world-wide.
In France, the prospects for bioethanol production have dimmed, at least in the short term. While the Farm Ministry in September 2000 raised the production ceilings for ETBE by an extra 115,000 tonnes, the decision by a European court has challenged the current practice of support. Up to now, biofuel plants in France were granted tax exemptions on the grounds that these were pilot projects that developed more environmentally friendly fuels. However, the court said the plants benefiting from the lower rates were operating established processes, and that the aid was thus for economic and industrial rather than technological purposes. In this case, lower duties could only have been approved by unanimous ministerial agreement, it said. However, the industry is confident that the dispute will be settled soon and that the sector will be allowed to grow further.
Production in Germany could rise slightly in 2001, due to higher output in the fermentation sector. In the wake of the reform of the German Branntweinmonopol, some industrial distilleries (molasses based) could opt out of the current market regulation, taking advantage of rather favourable transition rules. Figures so far suggest that fermentation alcohol production could rise by some 100,000 hl.
In Italy, production will fall due to the exit of a market major in the molasses alcohol sector, as well as lower wine alcohol production.
Production in central and eastern Europe is expected to grow only marginally.
The Russian alcohol market is the largest in Europe, even though its size is vague because of the big black market. According to official figures, total alcohol output in 2000 reached around 800 mln litres, the largest part of which was beverage alcohol. For 2001, an increase is forecast in beverage alcohol production, after the sector had suffered from various tax increases implemented in 2000. In Ukraine, the government is trying to put the industry on a sounder footing. A fuel alcohol program was implemented in summer 2000, but so far production has remained below expectations. This is forecast to change in 2001. At the same time, first data for 2001 suggest that beverage and industrial alcohol production may rise, with the total to May being up by around 25 per cent year-on-year. Total beverage alcohol production in 2000 was around 190 mln litres, the country's industry association UkrSpirt said.

Africa - ethanol producers in the south take new look at export potential

Ethanol production in Africa is concentrated on the southern tip of the continent, with the Republic of South Africa accounting for approximately 70 per cent of the total. The largest player is SASOL, producing industrial alcohol from coal and gas, with a capacity of around 220,000 tonnes a year. All of this is captively used to make ethyl acetate, high purity ethanol and a small volume for fuel. Production of high purity ethanol has been growing in recent years, with the total in 2001 forecast to reach 126,000 tonnes, against 97,000 tonnes in 2000.
Besides synthetic alcohol, South Africa also produces increasing amounts of fermentation ethanol, with molasses being the major feedstock. Illovo's Merebank facility is forecast to reach its capacity limits in 2001 of 40 mln litres compared with 38 mln in 2000. In early 2001, leading trade houses Alcodis and Alcotra, Belgium, acquired NCP Alcohols of South Africa for Rand 70 mln. NCP produced 24,000 tonnes of alcohol in 2000, and is presently preparing to double that quantity. The alcohol is mainly destined for export markets in Africa, Asia and America.
One of the most interesting import markets in Africa in recent years was Nigeria. The country stopped producing ethanol in 2001, after cheap world market imports and a difficult domestic feedstock situation had undermined the viability of the domestic sector. The total market volume in Nigeria is estimated at around 90 mln litres, the largest part of which is now supplied by South Africa, Brazil and Spain. In the meantime, Nosak Agencies Limited, an ethanol importer, is planning to build an alcohol plant in the country. The facility will use molasses from a sugar refinery which was built in the port of Lagos, and is owned by business magnate Dangote. The plant is to use an estimated 150 tonnes of molasses a day, which would imply a production capacity of around 45,000 litres per day.

Asia - all eyes on China

China is one of the latest countries to announce a comprehensive fuel ethanol program. In late 2000 it was announced that the country plans to build a fuel ethanol plant in the province of Jilin. The facility is designed for an annual production of 800,000 tonnes of fuel alcohol, and operations are to start by the end of 2002. The plant will produce anhydrous alcohol from corn. Earlier, a beverage ethanol plant in Heilongjiang was refitted so that it could produce fuel ethanol with a capacity of 100,000 tonnes a year. In addition, the Henan Tianguan Group started to produce fuel ethanol at a 200,000 tonne facility in March. Finally, a 500,000 tonne plant has been announced for the cane growing province of Guangdong. All plants combined would raise fuel ethanol production capacity to 1.6 mln tonnes. China sees fuel ethanol as an opportunity to utilise its structural grain surpluses more efficiently and to reduce the amount of oil imports. At present, China consumes about 36 mln tonnes of gasoline a year.
In Thailand the fuel ethanol program, announced with much fanfare in late 2000, is getting under way. Local and international investors are looking at the possibility of building plants with an overall capacity of 2 mln litres per day, with sugar cane and tapioca being used as feedstocks. As in the case of China, Thailand aims to reduce its oil import bill and to create new outlets for farm produce. So far, two oil companies have started distributing fuel ethanol blends, but have run into difficulties sourcing sufficient quantities of feedstocks. Fuel ethanol blends are sold at prices which are somewhat lower than those for premium gasoline and demand has been brisk, industry sources said.
India is the third country in the region which has started to produce anhydrous alcohol for fuel purposes. At present there are three pilot plants operating in the country producing ethanol for sale in fuel blends containing around five per cent alcohol. India is heavily dependent on oil imports with the total forecast at around 75 mln tonnes in 2001 valued at $17.5 bln. At the same time, the ethanol industry in India is suffering from oversupply, with total capacity now put at 3.2 bln litres, while actual production is around 1.8 bln. However, the argument is not as straightforward as it may seem. The country's large alco-chemical industry fears that production of fuel ethanol could raise prices of molasses, thus increasing production costs for them as well. The industry predicts that many facilities could face bankruptcy as a result of higher feedstock costs. However, so far the government seems to be determined to push ahead with the scheme.

World Ethanol Production (1000hl)








8 000

8 120

7 540

7 788

7 671


2 950

2 850

3 400

3 640

3 750


1 900

2 056

2 009

2 251

2 297


2 250

1 450

1 250

1 400

1 360


4 300

4 350

4 100

4 220

4 100

Other EU

2 221

1 871

1 853

1 876

2 020


21 621

20 697

20 152

21 175

21 198

Czech Republic




1 050

1 090








1 580

1 600

1 700

2 080

2 400


11 700

11 500

12 800

12 000

11 800


2 200

1 960

1 740

1 560

2 470

Other Europe

3 023

3 032

2 952

3 045

3 587


41 534

40 242

40 725

41 404

43 076


1 530

1 710

1 735

1 766

1 610


119 000

114 000

129 821

141 221

154 934


2 380

2 380

2 000

1 500

1 500






1 100




















75 800

70 500

66 050

64 500

58 860

Other Americas

4 180

4 042

3 867

3 828

3 770


205 668

195 118

205 606

214 904

223 069


30 900

29 700

28 600

28 000

26 900


17 800

17 200

16 900

16 881

16 470


1 650

1 600

1 500

1 650

1 740


1 360

1 100

1 040

1 020

1 040


3 900

4 100

3 900

3 700

3 900


1 500

1 000

3 200

2 650

3 750

Other Asia

2 485

2 613

2 653

2 820

2 763


59 595

57 313

57 793

56 721

56 563


1 540

1 200

1 000



New Zealand






Other Oceania







1 794

1 475

1 256

1 170

1 108







South African CU

3 852

3 800

3 900

4 100

4 300







Othe Africa

1 059

1 036

1 048


1 089


5 324

5 213

5 333

5 431

5 795


313 915

299 361

310 713

319 630

329 611



The "fuel ethanolization" of the world alcohol industry is set to continue. If all recently announced ethanol projects are implemented, total fuel ethanol production world-wide could grow to 31 bln litres by 2006 against somewhat below 20 bln in 2001. As a result, the share of fuel ethanol in 2005 could jump to almost 70 per cent compared with around 63 in 2001. Such a change is likely to have far reaching implications for the world alcohol sector. At a national level, such a growth can only be facilitated if plant sizes increase tremendously. This, in turn, would have repercussions on the feedstock market as well, where infrastructural adaptations would have to take place. At the same time, distribution systems would have to change. In countries where fuel ethanol receives financial assistance from the state (in the form of tax incentives or direct subsidies, etc.), fuel ethanol plants are likely to crowd out those producers that traditionally supply the industrial or beverage sector. This is so because fuel ethanol producers can fully utilise economies of scale and are also able to cross-subsidise production for other markets. The USA is a good example of what to expect if fuel ethanol production takes off on a large scale. Today, fuel ethanol producers also dominate the beverage and industrial markets. However, the structure of the distilling industries in other countries is different and therefore the development path needs not necessarily be the same. However, the forces at work will be the same and something similar can therefore be expected.
At an international level, the increased production and utilisation of fuel ethanol will make necessary an international exchange mechanism, which can help to stabilise the market in times of regional production shortfalls. This will be a very difficult operation. After all, fuel ethanol production in most countries is being subsidised in order to support domestic farmers. If large scale imports occurred, foreign farmers and ethanol industries would benefit from these support mechanisms. Nevertheless, an international exchange will be the only way to firmly establish large-scale fuel ethanol programmes in any one country. Biofuels are produced from renewable resources, supplies of which are dependent on the weather. This is a fundamental difference to non-renewables, such as oil and gas. As a result, the level of production cannot be fully controlled by mankind. On the other hand, being produced from agricultural crops, fuel ethanol production need not be concentrated in a handful of countries, as is the case in the oil sector. Therefore, it is unlikely that a typical importer/exporter relationship will develop. Instead, international trade will occur in order to compensate for temporary production shortfalls and, as such, will remain at a rather limited level relative to world production. There could be some countries that will start to regularly import fuel ethanol in order to make the fuel sold on the domestic market, more environmentally friendly. However, these countries will remain the exception. Fuel ethanol, besides its environmental value, is and will remain first and foremost an instrument to support farmers. It is they, who in the first place, will profit from fuel ethanol programs and it is they who primarily lobby for the production and the utilisation of fuel ethanol.

Back to The Distillery Website