US industrial ethanol demand drops by 20%

22 January 2009 00:23  [Source: ICIS news]

HOUSTON (ICIS news)--US industrial ethanol consumption this month is about 20% from one year earlier, pressured by weak demand due to a faltering US economy, a producer said on Wednesday.

Industrial ethanol consumption in the ink and coatings segments has dropped by 20%-plus, the source said, adding that in the pharmaceuticals sector consumption was off by 5-10%.

Statistical data on the consumption levels was not available.

The ink and coatings sector was hurt by the slump in the housing and automotive sectors, the source said.

A bleak outlook for the US economy indicated more weakness in the months ahead, the producer said, adding that it was unlikely that the market has already bottomed out.

An industrial ethanol buyer concurred, saying “business was just very slow” for small and medium-size customers of ethanol.

The drop in US demand for industrial ethanol has increased competition in the sector and put pressure on contract prices.

US industrial ethanol contracts in January were assessed at $3.65-3.75/gal for 200-proof grade, down by 20 cents/gal from December, according to global chemical market intelligence service ICIS pricing.

Market sources said contracts could shed another 20 cents/gal before the end of the month due to continued weak demand.

Industrial ethanol can be made via the fermentation process, like fuel ethanol, or through the hydration of ethylene.

The main US producers of industrial ethanol are ADM, MGP Ingredients, Grain Processing Corporation (GPC) and LyondellBasell.

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For more on ethanol visit ICIS chemical intelligence
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By: William Lemos
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