US MGP to restart ethanol plant under joint venture
23 November 2009 20:34 [Source: ICIS news]
HOUSTON (ICIS news)--US ethanol maker MGP Ingredients said on Monday it would resume operations at its Pekin ethanol facility in Illinois in a partnership with SEACOR Energy.
Under the agreement, SEACOR will pay MGP $15m (€10m) for a 50% stake in the 90m gal/year plant, which produces mostly fuel-grade ethanol.
MGP shut down the facility in February, citing weakening ethanol market conditions.
Florida-based SEACOR will market Pekin’s fuel ethanol output, while MGP will handle the plant’s industrial and beverage ethanol business, MGP said.
Around 80% of the production at the facility is dedicated to fuel-grade ethanol and the remainder to potable and industrial alcohol.
The restart at Pekin is one of several being reported in the US industry, following a 30% surge in US fuel ethanol prices since late August.
A Credit Suisse survey in late October put idled US ethanol capacity at around 1.2bn gal/year, of which 34% - or 410m gal/year - could be reactivated in the near term, the investment bank said.
While Credit Suisse said US fuel ethanol profitability is likely to be short lived due to increased production, MGP will find a market ready to take all the industrial ethanol it can get because of a surge in demand for hand sanitizers.
Industrial ethanol accounts for more than 60% of the contents in hand sanitizers, for which demand has soared in 2009 as a result of the H1N1 (swine flu) pandemic.
“Industrial ethanol demand is strong and the market could easily absorb all that,” a source said, referring to production from MGP in Pekin.
US industrial ethanol prices in November were assessed at $3.00-3.10/gal for 200-proof grade and at $2.75-2.95/gal for 190 grade, according to global chemical market intelligence service ICIS pricing.
Two US producers announced price increase initiatives of 20 cents/gal for 15 November, citing tight supply, strong demand and higher feedstock costs.
According to sources, two other producers also announced a 20-cent/gal increase, but effective on 1 January 2010.
The US has five industrial ethanol producers, but imports are also used to meet part of domestic demand.
US industrial ethanol demand is estimated at 285m-300m gal/year.
The main US producers of industrial ethanol are Archer Daniels Midland (ADM), MGP Ingredients, Grain Processing Corporation (GPC), LyondellBasell and Golden Triangle Energy.
($1 = €0.67)
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By: William Lemos
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