Ok, not much information given for this announced partnership between bio-isobutanol producer Gevo and South Africa-based chemical company Sasol yesterday during Gevo’s second quarter earnings conference call.
According to Gevo, the companies have entered a 3-year commercial off-take supply of bio-isobutanol to Sasol starting in 2012. Gevo anticipates the utilization of majority of their 2012 and 2013 planned production capacity, although the specific volume and price commitments were not mentioned in the press release.
In this case, Gevo’s bio-isobutanol will specifically be for solvents application for sale and distribution to Sasol’s global customer base. Gevo noted on the conference call that Asia might be the more quicker region to adopt the new product although the company is also foreseeing good demand for bio-isobutanol in Europe and the US.
Looking at Gevo’s capacity, the company said it plans to increase bio-isobutanol capacity of the Luverne, Minnesota plant it is currently retrofitting above the projected 18m gal/year. Gevo did not disclosed by how much, however. Another plant is in Redfield, South Carolina, which will also be retrofitted to produce 38m gal/year of bio-isobutanol, which is expected to start by the fourth quarter of 2012. The Luverne plant is expected to start in the first half of 2012.
So by the first quarter of 2013, Gevo will already have more than 58m gal/year of bio-isobutanol and the company is still talking to several other ethanol producers to get to its goal of 350m gal/year by 2015.
Gevo’s current pipeline of customers include Lanxess for an exclusive first right on bio-isobutanol supply (within 10 year-term) in synthetic rubber manufacture; Total on a non-binding deal on bio-isobutanol supply for use in biofuel; Toray for a non-binding supply of bio-isobutanol in paraxylene production; and Sasol for non-binding supply of bio-isobutanol in solvents application.
Gevo also has a non-binding agreement with United Airlines to supply bio-isobutanol at their hub airport in Chicago starting 2013. Analysts were questioning Gevo’s capability to supply its customers within the 2012-2013 timeframe but the company said it has the ability to ramp up faster to meet demand going forward.
“In the Sasol deal, the volumes they need will also not prevent us from meeting demand from our other relationships. We have mechanisms in place to make sure we don’t accept orders if we can’t make it. ” – Gevo.
In terms of pricing arrangement, Sasol’s contract will reportedly be indexed to corn. Despite higher corn prices this year, Gevo said Sasol was comfortable with the pricing as the company noted higher petrochemical values these days as well as projected continued higher price of crude oil.
Looking at current export pricing for petroleum-based isobutanol coming from the US, ICIS reported isobutanol price range at between 78 cents/lb and 81 cents/lb although US isobutanol contract price in July as of Friday last week were noted at $1.28-$1.32/lb.
In East Asia, by the way, petroleum-based isobutanol spot price were around 69-71 cents/lb as of last week.
There were several bio-isobutanol studies that came out on several news reports that are worth mentioning here: