Global Ethanol Market Overview, 2024-29

Market Dynamic

Market Drivers • Government policies and regulations: Government policies and regulations shape the worldwide ethanol market, driving demand and investment. Many countries have adopted policies to encourage ethanol production and consumption as part of larger initiatives to reduce greenhouse gas emissions, improve energy security, and stimulate rural development. One of the most important policy tools is the introduction of blending mandates or targets, which compel a specific percentage of ethanol to be blended with gasoline in transportation fuels. For example, the Renewable Fuel Standard (RFS) in the United States requires the incorporation of renewable fuels, including ethanol, into the country's fuel supply, increasing demand for ethanol. Similarly, countries such as Brazil have created blending mandates and tax incentives to promote ethanol use, with the Proálcool program serving as a longstanding example of successful government intervention in the ethanol market. • Technological advancements and innovation: Technological developments and innovation promote continual improvement and expansion in the worldwide ethanol market, opening up new avenues for efficiency, sustainability, and cost effectiveness. Ongoing research and development activities aim to improve the competitiveness and environmental performance of ethanol production through innovations in fermentation methods, the creation of innovative feedstocks, and production technologies. For instance, the commercialization of cellulosic ethanol technology allows for the use of agricultural waste, forestry waste, and other non-food feedstocks, lowering competition with food production while expanding the ethanol industry's feedstock base. Market Challenges • Feedstock competition and price volatility: Ethanol manufacturing is primarily dependent on agricultural commodities like corn, sugarcane, and other biomass feedstocks. As ethanol demand rises, so will the pressure on these feedstocks, potentially resulting in conflicts with food production, price instability, and supply chain disruptions. Weather variability, changes in land use patterns, and adjustments in global agricultural markets all contribute to increased competition for feedstocks. Adverse weather conditions, such as droughts or floods, can diminish agricultural yields, raise ethanol feedstock prices, and affect ethanol companies' profitability. Furthermore, swings in commodity prices caused by geopolitical conflicts, trade policies, and macroeconomic trends can increase market uncertainty. • Infrastructure limitations and distribution challenges: Infrastructure constraints and distribution issues pose substantial obstacles for the worldwide ethanol sector, influencing both production and consumption trends. Ethanol manufacturing plants necessitate specific infrastructure for feedstock storage, fermentation, distillation, and delivery. Furthermore, ethanol must be delivered, stored, and blended with gasoline before it reaches consumers, necessitating investment in transportation networks, blending facilities, and retail distribution channels. In many areas, the current infrastructure may be insufficient or antiquated to meet the increasing demand for ethanol, resulting in logistical bottlenecks, inefficiencies, and higher costs. For instance, insufficient storage capacity or transportation networks can cause supply chain interruptions, diminishing ethanol availability and market penetration. Market Trends • Increasing demand for renewable energy sources: Ethanol, made from renewable feedstocks including corn, sugarcane, and cellulose, is a cleaner-burning alternative to traditional fossil fuels like gasoline. This spike in demand is mostly driven by growing environmental concerns about climate change and air pollution. Governments around the world are enacting tough regulations and policies to reduce greenhouse gas emissions, promoting the use of renewable fuels such as ethanol. Furthermore, advances in ethanol production methods, as well as increased consumer knowledge of the benefits of renewable energy, contribute to ethanol's growing demand. As a result, the worldwide ethanol industry is rapidly expanding, with ethanol becoming an essential component of the global energy mix. • Diversification of feedstock sources: The diversification of feedstock sources is a prominent trend in the global ethanol market. While corn and sugarcane remain the key feedstocks for ethanol production, there is a rising interest in investigating alternate feedstocks to address concerns about food security and land use competition. Cellulosic biomass, in particular, shows promise as a sustainable feedstock for ethanol production because it may be derived from agriculture residues, energy crops, and forestry residues. Furthermore, advances in biotechnology allow for the conversion of non-food biomass into ethanol, hence broadening the ethanol industry's feedstock base. Diversifying feedstock sources strengthens the global ethanol market's resilience and sustainability, lowering reliance on individual crops and mitigating the risk of price volatility.

Key Development

• In May 2023, British Petroleum, a leading ethyl alcohol producer, plans to buy stakes in biofuel feedstock producers and invest directly in farming ventures to secure supplies as the global race for the low-carbon fuel speeds up. The company claimed to increase biofuel output three-fold by 2030 to 100,000 bpd, or roughly 4.5 million tons per year. • In March 2023, Wilmar Group Company Shree Renuka Sugars Ltd. announced its plan to increase the production of ethanol by 25% next year as part of its initiative towards green energy. • In February 2023, Kemin Industries introduced FermSAVER, a tea-extract product used in yeast fermentation for ethanol production, as part of its expanding Kemin Bio Solutions portfolio. • In 2023, Jagatjit Industries, based in Punjab, India, announced a massive investment to set up a grain-based ethanol production plant. With profit goals at the core, they aim to expand by catering to the growing demand for green fuels. • In 2023, Krishak Bharti Co-operative Ltd (KRIBHCO) invested around USD 11600 million to set up a grain-based ethanol production plant in the Indian states of Gujarat, Telangana and Andhra Pradesh with a production of 250 Kiloliter/ day.