Analysts warn of fast expansion of China’s ethanol gas plan
Current policy will create long-term demand for corn, and the depreciation of the dollar will also inevitably exacerbate the rise of food prices
According to a recent plan jointly released by the National Development and Reform Commission, the National Energy Administration, the Ministry of Finance and 15 other ministries, China will implement the use of ethanol-added gasoline nationwide by 2020 while targeting large-scale production of ethanol and developing advanced biofuel technologies by 2025, Yicai.com reported.
Analysts have shown great confidence in the sector: National Automotive Ethanol Promotion Leading Group Specialist Joe Yingbin told Yicai that it is currently the best time to expand the scale of ethanol production.
“First of all, China has a huge amount of corn stocks,” Joe said. “Secondly, international crude oil prices have rebounded — it will improve the business profits of ethanol fuel. Thirdly, the import tax rate of ethanol fuel has been raised from 5% to 30%, effectively inhibiting the impact of imported products. These factors show a great reason to expand.”
However, some analysts also warned that the country should not promote and expand the industry too fast.
Ma Wenfeng, senior analyst of Iger Agriculture, said world food prices have risen sharply and are expected to hit a new record high.
Ma said that the current policy will create long-term demand for corn, and the depreciation of the dollar will also inevitably exacerbate the rise of food prices.
“This will lead to a substantial increase in the cost of ethanol fuel production, and ethanol fuel companies will be more difficult to achieve better returns.” Ma said. “Some companies may be in trouble.”