1. BI Mid-Year 2017 Outlook: Global Biofuel Market
Global biofuel demand is likely to increase in the second half of the year, despite the failure of the US tax credit and the decline in ethanol demand in Brazil due to the end of the PIS/Cofins tax credit. As the EU policy has become clearer, the increase in US exports of ethanol to Brazil has partly solved the problem of oversupply in the United States. Under these factors, producers may see an increase in demand. What renewable energy standards does the US support? The policy is more uncertain since Trump took office. The price of fossil fuels is still very low, and the competitive pressure it brings is still there, but the pressure on competition has weakened because OPEC agreed to cut production.
2. Biofuel producers outperform market benchmarks because OPEC cuts inventory
After crude oil prices fell by 11%, biofuel prices are under great pressure. OPEC and some oil producers (including Russia) may cut production and partially solve the problem of oversupply. According to the 2017 Final Renewable Energy Standard (RFS), renewable energy production will increase by 480 million gallons, originally planned to be only 18.8 billion gallons, of which corn ethanol increased by 200 million gallons. So far this year, the BI global biofuel peer group index has risen by 12.6%, and the MSCI ACWI global index has risen by 10.6%.
3. European biofuel company's share price rises, China's tariff damage spread transaction
In the 2017-2018 fiscal year, CropEnergies revenue will hit a new high and Wilton's factory is in production. With full-year profit growth of 61%, CropEnergies has risen 107% this year, leading the Bloomberg biofuels peer group, followed by Verbio, which grew 34%. Pacific Ethanol fell 36% and Green Plains fell 19% because China’s anti-dumping duties led to a drop in the price of dried distiller's grains. Members of the BI Bloomberg Biofuels equivalent group rose an average of 12.6%.
4. Benefits of the US ethanol industry and damage to Brazil: Outlook for the middle of 2016
The growth rate of the biofuels industry will slow down in 2017, although US ethanol producers will continue to grow in the second half of the year as domestic demand increases and exports increase. Due to mandatory requirements for blending, Brazil's ethanol imports may increase, mainly from the United States, as Brazilian domestic producers have previously focused on sugar production rather than ethanol. Demand for ethanol in Europe may be reduced, but Germany is turning to biofuels to reduce greenhouse gas emissions, which may hurt demand.
5. Increase the production target of ethanol in 2017, and the increase may not be enough.
The Energy Information Administration (EIA) estimates that US ethanol production may increase by 3% in 2017, reaching 1.03 million barrels per day. Originally estimated to be only 1.01 million barrels, the above valuation may increase again, depending on the demand for the US summer driving season, there is another factor to consider, Green Plains and Archer-Daniels-Midland are expected Foreign demand for US ethanol will rise. EPA2017's final corn ethanol production target is 15 billion gallons, and in 2016 it was 14.5 billion gallons. Increased production will also stimulate demand. Production in 2017 is equivalent to 1.04 million barrels per day.
The EPA has a premise for such a goal: the renewable fuel policy will not change after Trump's election. From the perspective of elections, the EPA structure may be adjusted, and the target value for 2018 has a larger variable than the target value for 2017.
6. Increased use of biofuels, imports and domestic production can meet this demand
According to EIA's short-term energy plan, US biofuel consumption may increase by 7.4% in 2017. As demand increases and target production of biodiesel increases, demand may be met as imports increase by 8.5% compared to 2016 and domestic production by 5.1% (1.04 million barrels per day). The import volume of importers may continue to increase, and the price of renewable fuel RIN (renewable identification number) is about US$1. According to RIN, tax credits are available in compliance with the US Energy Conservation Agency's renewable fuel standards.
7, because the growth of biodiesel, the growth rate of European ethanol demand may decline
According to USDA, the blend of ethanol in transport fuels in the EU may fall by 0.6%, reaching 51.4 billion litres in 2017. In addition, reduced gasoline consumption, repeated biofuel calculations, and changes in German biofuels policies can hurt demand. The demand for biodiesel may increase by 39% to 144 gallons. At the same time, calls for the phasing out of palm oil in Europe are getting louder and louder, which could lead to higher prices for biodiesel.
8. RFS may be revised and EU policy is becoming clear: 2017 mid-year outlook
The EPA gave corn ethanol producers some breathing time this year, with a final target of only 15 billion gallons, and in 2016 it was 14.5 billion gallons. The Republican Party, which controls the White House and the Senate, supports the revision of the RFS bill. US producers can get a tax credit when blending biodiesel, and this policy may end or change. In Europe, policies are becoming clearer, and transportation fuels will be blended with 10% renewable energy by 2020, a policy that could increase demand for biofuels.
9. EPA's biofuel policy is more uncertain after Trump takes office
This year, the EPA's final corn ethanol production target is 15 billion gallons, an increase of 500 million gallons compared to 2016. There is still a gap of 500 million gallons compared with the 2017 statutory target. The EPA gives manufacturers time to make up the gap. Nonetheless, the goals of the RFS (especially after 2017) may change, as President Trump pointed out in the memorandum that a management freeze policy should be implemented for the EPA. The final biodiesel production target for 2017 is 2 billion gallons and will increase to 2.1 billion gallons in 2018.
Some companies will be affected: Archer Daniels Midland, Green Plains and Valero, which are the largest ethanol producers in the US, and biodiesel producers in the US include Renewable Energy Group and FutureFuel.
10. Modifying biofuels policy is unlikely to enter the upcoming agenda of Congress
President Trump used to support RFS, but many Republican legislators demanded reform. When he took office on the first day, Trump issued a memo, the Obama administration issued an RFS agreement, and Trump's memorandum delayed the effective date of the agreement until March 21. The memo does not address RFS. Instead, it adapts to all the rules and regulations that are not effective but are still being implemented. The White House Republican has now got the chips and can significantly cut the RFS target.
Corporate Impact: The RFS Reform Act is unlikely to be a priority for Trump or Congress in 2017. Biofuels have higher production targets and higher costs for US refineries to meet regulatory requirements, including Phillips 66, Valero, Marathon Petroleum, Tesoro, HollyFrontier, Western Refining and PBF Energy.
11. Uncertain policies in 2017 have repeatedly shaken biodiesel producers
At the beginning of 2017, the US Bound Tax Credit (BTC) policy was ineffective and the profits of biodiesel producers were more uncertain. Since 2009, the BTC has failed four times and has since been restarted by Congress. Producers benefit from BTC, which increases the value of biodiesel and can be taxed at $1 per gallon when blended with diesel. Renewable Energy Group and Europe Neste benefit.
If the BTC policy cannot be restored, more of Neste's production may be digested within Europe. This move may lead to supply growth in Europe, and at the same time, Eni and Total plan to increase the production of hydrogenated vegetable oil in France and Italy by 2020.
12. Re-leving PIS/Cofins tax may hurt ethanol demand
In Brazil, some car drivers use mixed fuels. Since January 1st, Brazil has re-implemented the PIS/Cofins tax, which is 0.12 reais per liter. Under the stimulation of this policy, car drivers using mixed fuels may give up without Water ethanol, switch to "Gasoline-c" (a blend of gasoline in Brazil). why? Because the price ratio of anhydrous ethanol and gasoline in Brazil has become 0.71x, which was 0.66x a year ago. Considering the taxation, the ratio is unlikely to fall below 0.7x. If it is below 0.7x, the hybrid fuel car driver will buy more absolute ethanol because its energy is about 70% of gasoline. In Brazil, 87% of new cars can use absolute ethanol.
13. Low oil prices still put pressure on biofuels: Outlook for mid-2017
In 2017, biofuel producers still need to face pressure from fossil fuels. Even if OPEC and some oil producing countries cut production, they will continue until the first quarter of 2018, and pressure will continue to exist. Demand for biodiesel is low in some markets, such as Germany, where the price of fatty acid methyl esters is 1.8 times that of ultra-low sulfur diesel, and Germany has also changed its policy related to greenhouse gas reduction targets. China's anti-dumping policy on US distiller's grains has affected crush spreads, and the situation may be eased due to the abundant supply of corn this year.
14. OPEC production cuts BoHo down and biodiesel producers increase profit margins
In 2017, biodiesel producers' profit margins will continue to increase as OPEC agrees to extend production cuts until March 2018. BoHo refers to the price difference between US soybean oil and fuel futures. So far this year, HoHo averaged about 86 cents per gallon, compared to about $1.15 in the same period in 2016. BoHo's shrinking means that biodiesel production costs are lower, blending is more economical, and producers' profit margins are increasing, such as Renewable Energy Group, FutureFuel and RBF Port Neches.
15. Dry distiller's grains price puts pressure on ethanol manufacturers
China has imposed anti-dumping policies on US corn distiller's grains, and the policy may continue to put pressure on corn ethanol producers' profit margins in the second half of the year. China imposes a 33.8% tariff on US DDGS (corn alcohol grains and solubles), resulting in a 44 cents per bushel corn loss and 64 cents less than two years ago. While demand in some countries has risen, such as Mexico, these increases in demand may prevent further declines in DDGS prices, but the problem of oversupply of corn may continue throughout 2017. The profit margin of Iowa corn ethanol has fallen to $1.63 per bushel, compared to $1.82 a year ago. A bushel of corn can produce approximately 2.8 gallons of ethanol and 17.75 pounds of dried distiller's grains.
16. Low fossil fuel prices and greenhouse gas reductions may limit biodiesel blending
In 2017, the demand for biodiesel in Germany will decrease, and the price of fatty acid methyl ester biodiesel will be 1.8 times that of ultra-low sulfur diesel. The change in greenhouse gas emission reduction targets and the competitive price of ethanol will lead to a decrease in demand. In addition, because biofuels are much more expensive than fossil fuels, blenders are reluctant to use them more than they require. In January-February, the use of biodiesel was 17% lower than a year ago, although diesel use increased by 4%.
Emissions must have been cut by 3.5% since 2015, by 4% since 2017 and by 6% after 2020.
17. The rise in crude oil prices encourages companies to blend ethanol in the second half of the year.
The United States allows companies to freely determine the amount of ethanol in gasoline. This policy may continue in the second half of the year. Crude oil futures tell us that the price per barrel of crude oil is $52, compared to $47 in the second half of 2016. OPEC agreed to extend production cuts by nine months, a move that could support the price of fossil fuels. Ethanol-gasoline blended raw materials are 20 cents a gallon, with an average discount of 6 cents in the first quarter and a premium of 9 cents per gallon in the second quarter of 2016. If the price of ethanol does not rise, companies may be encouraged to incorporate more ethanol, more than 10%, and 10% would have been the upper limit.
Impact on the business: Archer Daniels Midland has a capacity of 17.2 billion gallons and Poet Biorefining is 16.6 billion gallons, the largest ethanol producer in the United States. There are also some large producers, including Green Plains, Valero, and Pacific Ethanol.
18, 2017 ethanol raw material prices may rise, Brazilian producers are injured
According to the commodity forecast consensus, the raw material cost of US corn ethanol producers increased by 3.2% in 2017, and soybean biodiesel manufacturers only increased by 0.3%. From the analyst's median estimate, the price of raw sugar this year is $18.9 per pound, up 4.1% from 2016. The profit margin of Brazilian sugarcane ethanol producers may be affected, because the strong will stimulate Brazil's imports. American corn ethanol. Some ethanol producers in Europe use wheat, and their costs will not change in 2017.
Global biofuel demand is likely to increase in the second half of the year, despite the failure of the US tax credit and the decline in ethanol demand in Brazil due to the end of the PIS/Cofins tax credit. As the EU policy has become clearer, the increase in US exports of ethanol to Brazil has partly solved the problem of oversupply in the United States. Under these factors, producers may see an increase in demand. What renewable energy standards does the US support? The policy is more uncertain since Trump took office. The price of fossil fuels is still very low, and the competitive pressure it brings is still there, but the pressure on competition has weakened because OPEC agreed to cut production.
2. Biofuel producers outperform market benchmarks because OPEC cuts inventory
After crude oil prices fell by 11%, biofuel prices are under great pressure. OPEC and some oil producers (including Russia) may cut production and partially solve the problem of oversupply. According to the 2017 Final Renewable Energy Standard (RFS), renewable energy production will increase by 480 million gallons, originally planned to be only 18.8 billion gallons, of which corn ethanol increased by 200 million gallons. So far this year, the BI global biofuel peer group index has risen by 12.6%, and the MSCI ACWI global index has risen by 10.6%.
3. European biofuel company's share price rises, China's tariff damage spread transaction
In the 2017-2018 fiscal year, CropEnergies revenue will hit a new high and Wilton's factory is in production. With full-year profit growth of 61%, CropEnergies has risen 107% this year, leading the Bloomberg biofuels peer group, followed by Verbio, which grew 34%. Pacific Ethanol fell 36% and Green Plains fell 19% because China’s anti-dumping duties led to a drop in the price of dried distiller's grains. Members of the BI Bloomberg Biofuels equivalent group rose an average of 12.6%.
4. Benefits of the US ethanol industry and damage to Brazil: Outlook for the middle of 2016
The growth rate of the biofuels industry will slow down in 2017, although US ethanol producers will continue to grow in the second half of the year as domestic demand increases and exports increase. Due to mandatory requirements for blending, Brazil's ethanol imports may increase, mainly from the United States, as Brazilian domestic producers have previously focused on sugar production rather than ethanol. Demand for ethanol in Europe may be reduced, but Germany is turning to biofuels to reduce greenhouse gas emissions, which may hurt demand.
5. Increase the production target of ethanol in 2017, and the increase may not be enough.
The Energy Information Administration (EIA) estimates that US ethanol production may increase by 3% in 2017, reaching 1.03 million barrels per day. Originally estimated to be only 1.01 million barrels, the above valuation may increase again, depending on the demand for the US summer driving season, there is another factor to consider, Green Plains and Archer-Daniels-Midland are expected Foreign demand for US ethanol will rise. EPA2017's final corn ethanol production target is 15 billion gallons, and in 2016 it was 14.5 billion gallons. Increased production will also stimulate demand. Production in 2017 is equivalent to 1.04 million barrels per day.
The EPA has a premise for such a goal: the renewable fuel policy will not change after Trump's election. From the perspective of elections, the EPA structure may be adjusted, and the target value for 2018 has a larger variable than the target value for 2017.
6. Increased use of biofuels, imports and domestic production can meet this demand
According to EIA's short-term energy plan, US biofuel consumption may increase by 7.4% in 2017. As demand increases and target production of biodiesel increases, demand may be met as imports increase by 8.5% compared to 2016 and domestic production by 5.1% (1.04 million barrels per day). The import volume of importers may continue to increase, and the price of renewable fuel RIN (renewable identification number) is about US$1. According to RIN, tax credits are available in compliance with the US Energy Conservation Agency's renewable fuel standards.
7, because the growth of biodiesel, the growth rate of European ethanol demand may decline
According to USDA, the blend of ethanol in transport fuels in the EU may fall by 0.6%, reaching 51.4 billion litres in 2017. In addition, reduced gasoline consumption, repeated biofuel calculations, and changes in German biofuels policies can hurt demand. The demand for biodiesel may increase by 39% to 144 gallons. At the same time, calls for the phasing out of palm oil in Europe are getting louder and louder, which could lead to higher prices for biodiesel.
8. RFS may be revised and EU policy is becoming clear: 2017 mid-year outlook
The EPA gave corn ethanol producers some breathing time this year, with a final target of only 15 billion gallons, and in 2016 it was 14.5 billion gallons. The Republican Party, which controls the White House and the Senate, supports the revision of the RFS bill. US producers can get a tax credit when blending biodiesel, and this policy may end or change. In Europe, policies are becoming clearer, and transportation fuels will be blended with 10% renewable energy by 2020, a policy that could increase demand for biofuels.
9. EPA's biofuel policy is more uncertain after Trump takes office
This year, the EPA's final corn ethanol production target is 15 billion gallons, an increase of 500 million gallons compared to 2016. There is still a gap of 500 million gallons compared with the 2017 statutory target. The EPA gives manufacturers time to make up the gap. Nonetheless, the goals of the RFS (especially after 2017) may change, as President Trump pointed out in the memorandum that a management freeze policy should be implemented for the EPA. The final biodiesel production target for 2017 is 2 billion gallons and will increase to 2.1 billion gallons in 2018.
Some companies will be affected: Archer Daniels Midland, Green Plains and Valero, which are the largest ethanol producers in the US, and biodiesel producers in the US include Renewable Energy Group and FutureFuel.
10. Modifying biofuels policy is unlikely to enter the upcoming agenda of Congress
President Trump used to support RFS, but many Republican legislators demanded reform. When he took office on the first day, Trump issued a memo, the Obama administration issued an RFS agreement, and Trump's memorandum delayed the effective date of the agreement until March 21. The memo does not address RFS. Instead, it adapts to all the rules and regulations that are not effective but are still being implemented. The White House Republican has now got the chips and can significantly cut the RFS target.
Corporate Impact: The RFS Reform Act is unlikely to be a priority for Trump or Congress in 2017. Biofuels have higher production targets and higher costs for US refineries to meet regulatory requirements, including Phillips 66, Valero, Marathon Petroleum, Tesoro, HollyFrontier, Western Refining and PBF Energy.
11. Uncertain policies in 2017 have repeatedly shaken biodiesel producers
At the beginning of 2017, the US Bound Tax Credit (BTC) policy was ineffective and the profits of biodiesel producers were more uncertain. Since 2009, the BTC has failed four times and has since been restarted by Congress. Producers benefit from BTC, which increases the value of biodiesel and can be taxed at $1 per gallon when blended with diesel. Renewable Energy Group and Europe Neste benefit.
If the BTC policy cannot be restored, more of Neste's production may be digested within Europe. This move may lead to supply growth in Europe, and at the same time, Eni and Total plan to increase the production of hydrogenated vegetable oil in France and Italy by 2020.
12. Re-leving PIS/Cofins tax may hurt ethanol demand
In Brazil, some car drivers use mixed fuels. Since January 1st, Brazil has re-implemented the PIS/Cofins tax, which is 0.12 reais per liter. Under the stimulation of this policy, car drivers using mixed fuels may give up without Water ethanol, switch to "Gasoline-c" (a blend of gasoline in Brazil). why? Because the price ratio of anhydrous ethanol and gasoline in Brazil has become 0.71x, which was 0.66x a year ago. Considering the taxation, the ratio is unlikely to fall below 0.7x. If it is below 0.7x, the hybrid fuel car driver will buy more absolute ethanol because its energy is about 70% of gasoline. In Brazil, 87% of new cars can use absolute ethanol.
13. Low oil prices still put pressure on biofuels: Outlook for mid-2017
In 2017, biofuel producers still need to face pressure from fossil fuels. Even if OPEC and some oil producing countries cut production, they will continue until the first quarter of 2018, and pressure will continue to exist. Demand for biodiesel is low in some markets, such as Germany, where the price of fatty acid methyl esters is 1.8 times that of ultra-low sulfur diesel, and Germany has also changed its policy related to greenhouse gas reduction targets. China's anti-dumping policy on US distiller's grains has affected crush spreads, and the situation may be eased due to the abundant supply of corn this year.
14. OPEC production cuts BoHo down and biodiesel producers increase profit margins
In 2017, biodiesel producers' profit margins will continue to increase as OPEC agrees to extend production cuts until March 2018. BoHo refers to the price difference between US soybean oil and fuel futures. So far this year, HoHo averaged about 86 cents per gallon, compared to about $1.15 in the same period in 2016. BoHo's shrinking means that biodiesel production costs are lower, blending is more economical, and producers' profit margins are increasing, such as Renewable Energy Group, FutureFuel and RBF Port Neches.
15. Dry distiller's grains price puts pressure on ethanol manufacturers
China has imposed anti-dumping policies on US corn distiller's grains, and the policy may continue to put pressure on corn ethanol producers' profit margins in the second half of the year. China imposes a 33.8% tariff on US DDGS (corn alcohol grains and solubles), resulting in a 44 cents per bushel corn loss and 64 cents less than two years ago. While demand in some countries has risen, such as Mexico, these increases in demand may prevent further declines in DDGS prices, but the problem of oversupply of corn may continue throughout 2017. The profit margin of Iowa corn ethanol has fallen to $1.63 per bushel, compared to $1.82 a year ago. A bushel of corn can produce approximately 2.8 gallons of ethanol and 17.75 pounds of dried distiller's grains.
16. Low fossil fuel prices and greenhouse gas reductions may limit biodiesel blending
In 2017, the demand for biodiesel in Germany will decrease, and the price of fatty acid methyl ester biodiesel will be 1.8 times that of ultra-low sulfur diesel. The change in greenhouse gas emission reduction targets and the competitive price of ethanol will lead to a decrease in demand. In addition, because biofuels are much more expensive than fossil fuels, blenders are reluctant to use them more than they require. In January-February, the use of biodiesel was 17% lower than a year ago, although diesel use increased by 4%.
Emissions must have been cut by 3.5% since 2015, by 4% since 2017 and by 6% after 2020.
17. The rise in crude oil prices encourages companies to blend ethanol in the second half of the year.
The United States allows companies to freely determine the amount of ethanol in gasoline. This policy may continue in the second half of the year. Crude oil futures tell us that the price per barrel of crude oil is $52, compared to $47 in the second half of 2016. OPEC agreed to extend production cuts by nine months, a move that could support the price of fossil fuels. Ethanol-gasoline blended raw materials are 20 cents a gallon, with an average discount of 6 cents in the first quarter and a premium of 9 cents per gallon in the second quarter of 2016. If the price of ethanol does not rise, companies may be encouraged to incorporate more ethanol, more than 10%, and 10% would have been the upper limit.
Impact on the business: Archer Daniels Midland has a capacity of 17.2 billion gallons and Poet Biorefining is 16.6 billion gallons, the largest ethanol producer in the United States. There are also some large producers, including Green Plains, Valero, and Pacific Ethanol.
18, 2017 ethanol raw material prices may rise, Brazilian producers are injured
According to the commodity forecast consensus, the raw material cost of US corn ethanol producers increased by 3.2% in 2017, and soybean biodiesel manufacturers only increased by 0.3%. From the analyst's median estimate, the price of raw sugar this year is $18.9 per pound, up 4.1% from 2016. The profit margin of Brazilian sugarcane ethanol producers may be affected, because the strong will stimulate Brazil's imports. American corn ethanol. Some ethanol producers in Europe use wheat, and their costs will not change in 2017.
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