Upgrade to Pro — share decks privately, control downloads, hide ads and more …

The Changing Landscape in International Ethanol Markets

The Changing Landscape in International Ethanol Markets

Juan Sacoto
IHS Markit Agribusiness

Transcript

  1. Confidential. © 2021 IHS Markit®. All rights reserved. Confidential. ©

    2021 IHS Markit®. All Rights Reserved. The Changing Landscape in International Ethanol Markets 1 Juan Sacoto IHS Markit Agribusiness Juan.Sacoto@ihsmarkit.com February 2021 National Ethanol Conference 2021
  2. Confidential. © 2021 IHS Markit®. All rights reserved. Copyright notice

    and disclaimer © 2021 IHS Markit. All rights reserved. For IHS Markit clients’ use only. These webinar slides are subject to IHS Markit copyright and are being provided to IHS Markit clients only. You are free to redistribute the slides internally within your organization in the form as made available by IHS Markit provided that all IHS Markit legal notices and markings are displayed. You are not permitted to reproduce, reuse, or otherwise redistribute the slides or any portion of this presentation to anyone outside of your organization without prior written consent of IHS Markit. This presentation is not to be construed as legal or financial advice, use of or reliance on any content is entirely at your own risk, and to the extent permitted by law, IHS Markit shall not be liable for any errors or omissions or any loss, damage, or expense incurred by you or your organization. 2
  3. Confidential. © 2021 IHS Markit®. All rights reserved. A brief

    outlook of global ethanol - beyond US and Brazil 3
  4. Confidential. © 2021 IHS Markit®. All rights reserved. DRAFT 4

    Global ethanol demand has been growing steadily … Brazil have started to bring a new wave of growth and investment 0 20,000 40,000 60,000 80,000 100,000 120,000 2010 2015 2020 2025 2030 Million Liters United States Brazil Source: IHS Markit World ethanol consumption ( US + Brazil) © 2021 IHS Markit
  5. Confidential. © 2021 IHS Markit®. All rights reserved. DRAFT 5

    .... However, non-US/Brazil ethanol demand growth has also accelerated .. We expect the combined growth in the rest of the world to be similar to Brazil 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 2010 2015 2020 2025 2030 Million Liters EU China Canada India Thailand Argentina Vietnam Colombia Philippines Japan Peru Paraguay Ecuador Bolivia Costa rica Uruguay Australia Source: IHS Markit World ethanol consumption – other countries © 2021 IHS Markit
  6. Confidential. © 2021 IHS Markit®. All rights reserved. DRAFT 6

    Most demand growth is being supplied by domestic sources of production … however there is optimism to grow exports in the future ✓ Brazil Renovabio will increase demand for ethanol in Brazil 2030 … ✓ E15 in the US and then other countries ✓ Sustainability and decarbonization initiatives have not slowed – in fact, these are intensifying ✓ There is an enormous demand for alternatives to lower carbon emissions ✓ Can ethanol meet the challenge? ✓ Can ethanol become carbon neutral?
  7. Confidential. © 2021 IHS Markit®. All rights reserved. RenovaBio impact

    on biofuel demand and evolution of corn-based ethanol in Brazil 7
  8. Confidential. © 2021 IHS Markit®. All rights reserved. RenovaBio sets

    an annual target to reduce GHG from covered sectors including transport fuels 8 16.8 28.7 41.0 49.8 59.6 66.9 73.3 79.5 85.1 90.1 95.5 14.5 24.9 34.2 42.4 50.8 58.9 66.5 72.9 79.3 85.5 90.7 0 20 40 60 80 100 120 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 MIlion Cbios Initial target Max Initial target Target Initial target Min New proposal Max New proposal Target New proposal Min Annual Decarbonization Credits Targets Source: ANP, IHS Markit ✓ Reduce greenhouse gas emissions by 43% versus 2005 levels. ✓ Renewable energy represent 45% of the energy matrix, with biofuels representing 18% of the energy matrix. ✓ Reduce the CI of transportation fuels by ~10% below a 2018 baseline of 73.6 gCO2e/MJ to 66.1 gCO2e/MJ by 2029. ✓ 2020: CBIOs = 14,535,334 or 97.6% of the target
  9. Confidential. © 2021 IHS Markit®. All rights reserved. Brazil biofuel

    demand will increase due to support from RenovaBio, which will affect gasoline demand 0 10 20 30 40 50 60 70 80 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 Gasoline A Ethanol Anhydrous Ethanol Hydrous Brazil Gasoline/Ethanol Demand Market Share Source: IHS Markit © 2021 IHS Markit Billion Liters 9
  10. Confidential. © 2021 IHS Markit®. All rights reserved. ~ >14

    additional billion liters of ethanol production capacity (starting in 2021) will be needed by 2030 in order to meet the RenovaBio fuel use target of 44 billion liters 0 0 1 1 2 3 3 4 5 7 1 2 3 3 4 5 6 7 8 8 9 9 10 0 2 4 6 8 10 12 14 16 18 2018 2020 2022 2024 2026 2028 2030 Billion Liters Sugarcane Corn Brazil Ethanol Capacity Increase to Meet RenovaBio Source: IHS Markit © 2021 IHS Markit 10 ✓ Corn based ethanol is already leading the expansion – sugar ethanol remains the larger share. ✓ Corn ethanol in Brazil is growing, taking advantage of lower corn prices in locations where logistics to export corn are expensive and ethanol prices are higher ✓ In the course of 2021 at least 1.0 billion liters (270 million gallons) will be added, with investment at roughly UDS800 million from (among others) Coprodia, Millenium Bioenergia and FS Bioenergia.
  11. Confidential. © 2021 IHS Markit®. All rights reserved. 2030 outlook

    shows sugar cane ethanol still as the dominant industry .. But corn based to account for 22% of production in just 10 ten years 15 20 25 30 35 40 45 50 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Sugarcane Total Ethanol Brazil Sugarcane/Corn Ethanol Production Market Share Source: IHS Markit © 2021 IHS Markit Billion Liters 11 “A government big enough to give you everything you want, is a government big enough to take it away” Thomas Jefferson IHSM growth projections are based on compliance with RenovaBio … CBIOs credit targets were changed once already by the government
  12. Confidential. © 2021 IHS Markit®. All rights reserved. GO 8,156

    Why corn ethanol? It is very competitive: expandable supply of second crop hence lower price, lower carbon intensity (CI), lower capex and opex Full 73% Flex 27% Production Capacity 12 Corn-based ethanol in Brazil
  13. Confidential. © 2021 IHS Markit®. All rights reserved. Brazil corn

    production is expected to increase by 34 million MT through 2030 to 136 million MT - second crop corn is a key advantage for corn ethanol 13 > The majority of corn is produced as a second crop after soybeans and production has expanded along with the increase in soybean production. > In the past 20 years double crop corn has increased and now accounts for 75% of total production. 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 !,000 MT Production Exports Feed Ethanol Brazil Corn Production, Domestic Consumption, and Exports Source: IHS Markit © 2021 IHS Markit
  14. Confidential. © 2021 IHS Markit®. All rights reserved. Potential remains

    high for further second crop expansion based on the soybean area that is not double cropped 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Corn (Second Crop) Soybean Brazil Crop Area - Major Crops Source: IHS Markit © 2021 IHS Markit Million Hectares 14
  15. Confidential. © 2021 IHS Markit®. All rights reserved. 15 Corn

    ethanol plants have lower capex than sugarcane ethanol plants 1.30 1.04 0.92 0.55 0.49 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 Sugarcane (Agriculture + Industrial) Greenfield Sugarcane (Only Industrial)* Greenfield Sugarcane (Only Industrial)* Brownfield Cane/corn Brownfield Corn Greenfield Corn and sugarcane ethanol plant capex Source: EPE, MME, IHS Markit © 2021 IHS Markit USD/Liter
  16. Confidential. © 2021 IHS Markit®. All rights reserved. 16 Second

    crop corn and sugarcane ethanol have lowest costs and greatest potential for further reduction by yield per hectare increases. 0.00 0.10 0.20 0.30 0.40 0.50 0.60 Feedstock Opex Capex Capital Cost Revenue of Cooproducts CBIO Total Cost Corn - Second Crop Source: IHS Markit © 2021 IHS Markit USD/Liter 0.00 0.10 0.20 0.30 0.40 0.50 0.60 Feedstock Opex Capex Capital Cost Revenue of Cooproducts CBIO Total Cost Sugarcane ethanol Source: IHS Markit © 2021 IHS Markit USD/Liter
  17. Confidential. © 2021 IHS Markit®. All rights reserved. Flex plants

    have slightly higher costs compared to stand-alone corn plants, but have advantages when compared to sugarcane 0.00 0.10 0.20 0.30 0.40 0.50 0.60 Feedstock Capex Variable Fixed By-product CBIO Total Cost Flex Plant Source: IHS Markit © 2021 IHS Markit USD/Liter 17
  18. IHS Markit Customer Care CustomerCare@ihsmarkit.com Asia and the Pacific Rim

    Japan: +81 3 6262 1887 Asia Pacific: +604 291 3600 Europe, Middle East, and Africa: +44 1344 328 300 Americas: +1 800 447 2273 Disclaimer The information contained in this presentation is confidential. Any unauthorized use, disclosure, reproduction, or dissemination, in full or in part, in any media or by any means, without the prior written permission of IHS Markit or any of its affiliates ("IHS Markit") is strictly prohibited. IHS Markit owns all IHS Markit logos and trade names contained in this presentation that are subject to license. Opinions, statements, estimates, and projections in this presentation (including other media) are solely those of the individual author(s) at the time of writing and do not necessarily reflect the opinions of IHS Markit. Neither IHS Markit nor the author(s) has any obligation to update this presentation in the event that any content, opinion, statement, estimate, or projection (collectively, "information") changes or subsequently becomes inaccurate. IHS Markit makes no warranty, expressed or implied, as to the accuracy, completeness, or timeliness of any information in this presentation, and shall not in any way be liable to any recipient for any inaccuracies or omissions. Without limiting the foregoing, IHS Markit shall have no liability whatsoever to any recipient, whether in contract, in tort (including negligence), under warranty, under statute or otherwise, in respect of any loss or damage suffered by any recipient as a result of or in connection with any information provided, or any course of action determined, by it or any third party, whether or not based on any information provided. The inclusion of a link to an external website by IHS Markit should not be understood to be an endorsement of that website or the site's owners (or their products/services). IHS Markit is not responsible for either the content or output of external websites. Copyright © 2021, IHS Markit®. All rights reserved and all intellectual property rights are retained by IHS Markit. Thank You Questions?
  19. Confidential. © 2021 IHS Markit®. All rights reserved. 19