China sets 2020 target for nationwide ethanol use

China plans to roll out the use of ethanol in gasoline nationally by 2020, state media reported Wednesday, citing a government document, as Beijing intensifies its push to boost industrial demand for corn and clean up pollution.

It’s the first time the government has set a targeted timeline for pushing the biofuel, known as E10 and containing 10% ethanol, across the world’s largest car market.

Mandates requiring a minimum amount of biofuel must be blended into fuel for the nation’s cars, similar to the U.S. and Brazil, are currently set at a provincial level, Reuters reported.

“This news has greatly boosted confidence inside the industry,” Michael Mao, an analyst with Sublime China Information, told Reuters, adding without government support, ethanol would likely be too expensive to survive in the market.

To implement the E10 plan, China will need to expand its biofuels industry on a major scale, Kallanish Energy understands.

The Xinhua report said the government looks to build an ethanol production base in the country’s northeast, the main corn growing region, without giving further details.

Based on estimates, gasoline demand will reach 150 million tonnes in 2020, the plan will require about 15 million tonnes of ethanol using about 45 million tonnes of corn each year, according to Reuters calculations.

China is the world’s third-largest ethanol producer, but with output of roughly 2.1 million tonnes a year, production is far behind global leaders Brazil and the U.S.

Still, the project has been in the works as Beijing has struggled to whittle down mountains of ageing corn in state warehouses. China has state corn reserves estimated at roughly 200 million tonnes — equivalent to a year of demand — following a now discontinued government stockpiling scheme to support farmers.

Analytics/consulting firm Wood Mackenzie said its base case forecasts China’s car fleet to grow from 160 million in 2016, to 390 million in 2035, which will drive the fleet’s fuel demand (mainly gasoline) from 2.8 million barrels per day (MMBPD), to 4.2 MMBPD over the same period.

“Car sales are currently around 25 million per annum, of which around 300,000 (close to 2%) are electric vehicles,” according to Feng Fu, senior consulting manager, and Yujiao Lei, associate, both part of Wood Mackenzie’s Asia Pacific Refining team. “We expect China’s car sales to reach 32 million by 2035, with EVs accounting for 5 million, or 15%, of total sales in our base case.”