Supply, Demand Still Going Up
In July, we get a clearer view in the European Union of the previous year’s production and consumption. Obtaining data is always a cumbersome, time-consuming operation. Once the data is there, the challenge is to explain the differences and eventually come up with the most accurate numbers. Every year when I try to pull together the supply and demand data on ethanol, I am reminded of what former U.K. Prime Minister Winston Churchill supposedly thought of statistics: “I only believe the statistics I make myself.” I will not go that far, but a lot of checking and double-checking is needed before a level of accuracy is achieved that is presentable.
For ethanol trade numbers, the European statistical office is still the best source. EU member states have the legal obligation to hand over national statistics to the Eurostat office. Getting in the national data is a time-consuming affair.
The collection of ethanol supply and demand data is done at two levels. One division in the European Commission needs to present the so-called ethanol balance every year. The analysis of the data obtained from the 27 member-states provides detailed information on feedstock and end-use. Another division produces data on fuel-use only, also based on national reporting. The data never matches and thus the search starts, comparing different sources to get a full, accurate picture.
The preliminary 2011 data now surfacing already allows some interesting initial observations.
Total domestic supply in 2011 was about 6.3 billion liters (1.6 billion gallons), 15 percent more than 2010. Total demand was about the same, almost 12 percent over the prior year. That would suggest that the market was in balance last year, with imports not accounted for. If we add the imports, however, there was a substantial oversupply of almost 1.5 billion liters.
Getting the import data right is always the biggest challenge. Undenatured or denatured ethanol needs an import license, which makes counting easy. It gets rather difficult as soon as ethanol enters in blended form with gasoline and/or another chemical product and the EU import statistics are not entirely reliable for those imports. The better way is to count the volumes from exporting countries, assuming that all exports to the EU were indeed consumed there. Last year, close to 1.2 billion liters entered though this not-so-transparent way, of which the U.S. accounted for 85 percent.
There were no real shifts in 2011 as far as production and consumption by country is concerned. France is still, by far, the number one ethanol producer in Europe, producing 1.8 billion liters (467 MMgy) followed by Germany at 223 million gallons. Next is the U.K., then Spain and number five is Belgium.
The biggest consumer of ethanol is Germany—good for close to 2 billion liters, of which two thirds goes into fuel. Number two is France with 1.5 billion liters and 70 percent going into fuel. The third biggest consumer of ethanol is the U.K. where 90 percent is used in fuel.
In terms of feedstocks, we see an increase of the cereal share in 2011 to the detriment of sugar juice. Almost 70 percent of ethanol production is now cereal based. Even though the statistics I am quoting from don’t tell us what type of cereals, we know from other sources that almost 50 percent is wheat and 35 percent maize. The second most preferred crop is sugar beet, which accounts for almost 23 percent of EU ethanol production. And finally, there is still some lower quality wine used as feedstock. The higher share of wheat can be explained by two factors: first, new production capacity coming online uses either wheat or corn and, second, higher global sugar prices made it more attractive to divert more sugar juice to the production of sugar than ethanol.
All in all, it can be concluded that 2011 is continuing the growth trend of previous years, though at a more modest pace than before. The growth pattern should continue this year. The true challenge is to obtain a growth rate in market prices that reflects the growth rate in supply and demand.
Author: Robert Vierhout