Industrial Ethanol Market Intelligence

Industry Outlook & Drivers

Industrial Ethanol Global Market Outlook

The global industrial ethanol market is set to grow at a CAGR of 2-3 percent over the next five years

• Non-fuel ethanol accounts for approximately 16 billion liters of the total ethanol production. In other words, 13-15 percent of the total ethanol consumption is for non-fuel applications such as chemicals, plastics, pharmaceutical and beverage industries, including cosmetics, cleaning products, paints and alcoholic drinks
• Key regions driving growth: Growth in Asia, Brazil and Europe will be driven by the demand from the solvents and chemical intermediates sector

Industrial Ethanol Demand Market Outlook

The global non-fuel ethanol market is balanced in mature markets like the US and Europe, having sufficient supply; while demand is marginally higher in the emerging markets like China and Brazil

•  Brazil is looking to leverage on the existing capacities and reducing exports, while China is dependent on imports from other Asian markets

Industrial Ethanol Global Market Production 

Non-fuel ethanol (or ethyl alcohol) is used in the manufacturing process for a wide range of products in industries across chemicals, plastics, pharmaceutical and beverage industries, including cosmetics, cleaning products, paints and alcoholic drinks. Its use in applications other than fuel blending accounts for approx. 5.4 billion gallons (20 billion litres) of ethanol.

Industrial Ethanol Global Supply-Demand Analysis

Demand and production is expected to grow in tandem and the market is expected to remain balanced with a very narrow supply-demand gap

• Asia is the center for industrial ethanol market, as it is the largest producer as well as consumer of industrial grade ethanol, accounting for slightly over 50 percent of the market
• Europe, with its large base of pharmaceutical, personal care and food & beverage industries, is the second largest consuming region for industrial grade ethanol, accounting for more than 2.5 billion litres

Market Outlook 

• The global ethanol production is projected to increase modestly during the outlook period from about 116 billion liters in 2018 to nearly 138 billion liters by 2023
• More than half of this increase is expected to originate from Brazil mostly to fill domestic demand. The second largest contributor to the expansion in ethanol production is Thailand followed by Brazil
• Recent capacity additions in Europe, which is a major consumer (importer) of non-fuel ethanol, will bring down its dependency on other exporting markets such as South America and Asia (Pakistan)

Engagement Outlook –Change in Procurement Pattern

Europe may not continue to get regular material from Asia (Pakistan)

• It is imperative that buyers in Europe look for alternate sourcing destinations as in recent times, the market was heavily reliant on material from Asia, and particularly from Pakistan, which is changing with China pulling significant material from Pakistan
• China has been drawing substantial amount of industrial ethanol from Pakistan as it is cost effective in comparison to the domestic ethanol prices and it makes it even more attractive for sellers in Pakistan, as there are no import duties owing to the Free Trade Agreement with China

Industrial Ethanol Global Demand by Application 

• Globally, solvents occupy the lion's share of the industrial ethanol demand market, at 63 percent, and is expected to grow at a CAGR of 3 percent . Chemical intermediates, which account for 37 percent of the global demand share, is expected to grow at a slightly higher growth rate of 3.5 percent over the next three years
• Applications pertaining to CPG & FBT markets have a significant share in the total demand market: Personal care (15 percent), cleaning products (10 percent) and food & beverage (10 percent). Hence, growth in these sectors significantly impact the ethanol demand market.
• Solvents: Paints, inks and the coating sector has the major share in demand, consuming 27 percent of industrial ethanol. This is followed by the personal care sector and cleaning products end applications, which accounts for 23 percent and 16 percent of the demand respectively
• Chemical intermediates: Acetic acid and acrylates are the major consumers of industrial grade ethanol, accounting for 29 percent and 28 percent respectively, of the total chemical intermediates demand

Global Trade Dynamics

• Over the last two years, traditional trade patterns have been changing as there is a shift in demand dynamics across major markets. Export levels from the U.S. have increased, while Brazil is looking to restrict their exports in order to cater to local demand
• CPG participants in China and Europe are likely to leverage the inflow of material into these markets

Global Exports - Ethanol

Shift in Export Trade Patterns

• The U.S., which was traditionally a net importer of non-fuel ethanol (industrial), has been exporting more volumes in comparison to imports over the past two years

Shift in Import Trade Patterns

• Imports are on the rise in regions like China. In recent times, imports from Pakistan have increased as industrial ethanol prices are competitive in comparison to local Chinese prices. This is resulting in a shortage for European imports, who traditionally buy from Pakistan
• Pakistan is choosing China over Europe as it is logistically better and has lower export costs due the free trade agreements