Ethanol is derived from either a fermentation or a synthetic process with a high degree of purity (96% or more). The two main grades are 96% and 99%.
96% beverage grade is used to make alcoholic drinks, and is always fermented from crops.
99.3%-99.9% anhydrous ethanol is used in fuel and is typically blended with gasoline in Europe.
Globally, fuel ethanol accounts for 73% of total ethanol production, with beverage ethanol at 17% and industrial ethanol at 10%.
European consumption of traditional ethanol for non-fuel uses totals 24m hl/year.
Synthetic ethanol comes from ethylene and is produced in Europe only by INEOS and Sasol. It accounts for some 400,000 tonnes/year out of 900,000 tonnes/year of 99% industrial sold in Europe, and 4m hl/year out of 25m hl/year (15%) of the European ethanol market overall.
Fermentation ethanol comes from crops. The main feedstocks in Europe are grain and sugar beet.
Both types can be used to make both industrial 96% and industrial 99% ethanol, but only fermented ethanol can be sold to make drinks, or used in food colourings and flavours.
Contract prices for the second quarter were stable to weak. Sellers said that demand for both 96% beverage grade and 99% industrial grade ethanol was at healthy levels but that supply was slightly outpacing buying interest.
When looking at offtake and feedstock values, sellers said that prices should in fact be increasing and questioned whether this trend will be reversed in the third quarter.
There are two ways to make ethanol: fermentation or synthetic. Fermentation is based on starch or sugar-based feedstocks such as sugarbeets, molasses, corn or wheat. There are two processes: wet milling and dry milling, the main difference being in the initial treatment of the grain and the feed co-products.
A small but increasing amount of ethanol is produced from non-traditional feedstocks such as waste products from the drinks, food and forestry industries.
Synthetic ethanol is based on the direct gas phase hydration of ethylene. The reaction is carried out at high temperature and pressure in a fixed bed reactor containing a phosphoric acid catalyst.
The price trend has been downward in recent quarterly contract settlements, with both the 99% industrial grade ethanol and 96% beverage grade ethanol markets well supplied.
However, producers say offtake is healthy and that this, combined with firmed feedstock costs could potentially reverse the downward trend going forward.
In December 2013, Sasol Solvents Germany announced that it had agreed to sell its German assets and solvents business to INEOS. In May 2014 relevant competition authorities approved the deal.
The process of acquisition is ongoing and will include Sasol’s 140,000 tonne/year ethanol unit at its plant in Herne, Germany. Sasol and INEOS are the only two producers of synthetic ethanol in Europe.
With the number of synthetic ethanol producers dwindling over the years, sources have said that buyers continue to broaden their supply chain with fermentation ethanol volumes.
Cargill is to invest €60m in building a new ethanol plant in Barby, Saxony Anhalt, Germany. The new facility will produce ethanol for the beverage, cosmetic and pharmaceutical industries in Europe.
The plant will be built alongside Cargill’s wheat processing plant in Barby and will therefore principally use wheat grown locally as a feedstock.
The new facility is expected to be operational by autumn 2015.