Fuel ethanol industry is about to differentiate

For some time now, international oil prices have continued to linger in the doldrums, which has caused the industry to report cautiously on the development of the fuel ethanol industry that was directly boosted by high crude oil prices. In addition to the lower oil prices, the recent domestic fuel ethanol industry related policies. The news shows that there are pressures and pressures, and the industry is not optimistic about the development of the fuel ethanol industry.

At the 2006 International Biofuels Conference held in September, Liu Qun, Secretary of the National Development and Reform Commission’s Industry Department, said that the domestic fuel ethanol industry has seen signs of overheating investment. In the future, the government will control support based on four supporting indicators: resources, technology, environmental protection, and energy consumption. Range and intensity. Subsequently, the country established a new policy of “reducing ethanol subsidies in 2007 to 1,373 yuan per ton,” while the previously prescribed 2005 subsidy was 1,883 yuan/ton, and in 2006, it was 1,628 yuan/ton. By the end of 2008, subsidies will be adjusted again.

Yu Kai, a researcher at Wuhan New Land Securities Co., Ltd., analyzed: “The real intention of the state to reduce subsidies is to encourage relevant companies to reduce production costs and strive to develop non-grain ethanol. Only by breaking through simple production techniques that rely on food crops for ethanol can companies reduce The cost of production will be maximized with the current subsidy."

"The existing policies will make the fuel ethanol industry differentiate. Although low-cost, high-efficiency companies will have advantages, but there is technology does not mean that they can obtain the market, the ability of enterprises to adapt to changes in the market is the key to success." Kai said.

Falling oil prices

Ethanol industry is optimistic about the long-term

With the rapid development of China's economy, China’s oil imports and foreign dependence have increased year by year. The continuous rise of international oil prices and the rapid increase in the gap in crude oil, making the development of alternative energy fuel ethanol industry has become China's direct power to ease the contradiction between energy supply and demand.

For a long time, the main raw material for ethanol production in China was corn and other crops, which caused the price of one ton of fuel ethanol to be more than 1,000 yuan per ton of gasoline. The recent decline in oil prices has led many people to believe that they can only rely on huge amounts of the country's The subsidized fuel ethanol industry has not made great efforts to develop this. For this, Liu Shukun, a joint securities researcher, believes that “the development of fuel ethanol as an alternative energy source not only eases the contradiction between oil supply and demand but also meets environmental protection requirements and can promote agricultural development. It cannot be due to the short-term international oil price decline. And it is doubtful about the development of fuel ethanol."

"The scarcity and non-renewability of petroleum resources are fundamental to the contradiction between energy supply and demand. The tight energy supply situation has existed for a long time. Energy demand continues to increase while oil is relatively scarce, and future energy supply conflicts will continue to increase."

"Although the country has recently adopted a new subsidy policy, turning the original cost plus reasonable profitability subsidies into fixed subsidies per ton will pose some pressure on domestic fuel ethanol companies, but companies will reduce production costs by producing ethanol from non-food crops. ""

It is understood that Henan Tianguan Group, which is currently taking the corn ethanol route, has already started the transformation process. Its annual output of 3,000 tons of fiber ethanol project has been laid at the end of August. It is reported that this is the first 1,000 tons of fiber ethanol industrial trial production line in China. .

Of course, due to the limited scale, the production cost of fiber ethanol is as high as 6,000 to 6,500 yuan/ton, which is 500 to 1,000 yuan more than the cost of wheat as raw material to produce fuel ethanol. However, with the success of the trial, the cost will be reduced after the expansion of production capacity.

Before that, Guangdong's first fuel ethanol production line using cassava as raw material also settled in Qingyuan, Guangdong in June. Guangxi, which is rich in molasses and cassava, is also planning to build two ethanol fuel production bases in Nanning and Guigang. In addition, there is news that Jilin China Resources Bio-chemical Co., Ltd. is also in a southern place to negotiate a merger and acquisition of cassava ethanol project. Of course, the production of fuel ethanol from sugar cane is also a good way.

In addition, Yu Kai said that in the case of domestic oil prices upside down, the temporary decline in international oil prices will not lead to the reduction of domestic gasoline prices, while the cost difference between fuel ethanol and gasoline, after the changes in raw materials and the expansion of production scale It is possible to eliminate it.

M&A originates from the industry

Wide prospects for development

Up to now, the state has approved the establishment of four fixed-point production plants, Jilin Fuel Ethanol, Heilongjiang China Resources Alcohol, Henan Tianguan Fuel Alcohol, and Anhui Fengyuan Fuel Alcohol. The annual production capacity of Jilin fuel ethanol has reached 440,000 tons, Heilongjiang China Resources Co., Ltd. is 370,000 tons, Henan Tianguan Group is 500,000 tons, and Anhui Fengyuan is about 440,000 tons.

At the National Biofuel Conference in 2006, officials from the National Development and Reform Commission stated that the government will continue to develop the fuel ethanol industry in a modest manner and plan to end at the "Eleventh Five-Year Plan" period, so that the proportion of ethanol gasoline consumption in the country's gasoline consumption will rise from less than 20% now to More than 50%, by 2010, China's ethanol gasoline market is expected to reach 66.5 million tons, which means that the annual production of fuel ethanol in China will exceed 3.3 million tons.

However, in addition to the existing four national fuel ethanol pilot bases, the NDRC has not approved any new projects. At this meeting, the National Development and Reform Commission also revealed that there was no plan to approve any other new projects and the policy eliminated the possibility of blind development of the fuel ethanol industry.

According to industry sources, the relevant authorities now support the expansion of the existing four ethanol pilot companies from the "radius" center of their respective provinces to the entire country. Under such circumstances, the production capacity is stronger and the cost is lower. It will be an inevitable trend that companies will obtain greater spheres of influence.

Yu Kai believes that the new subsidy policy is a test of corporate efficiency and competitiveness, developing new technologies, and reducing costs. "Companies need to respond to changing policies, markets, and technologies, and they won't rely on a single advantage." Under the current circumstances, solving the financial problems in the future is an urgent task for ethanol producers.

Recently, the news of Sinochem International (600500)'s acquisition of Henan Tianguan has not been recognized by Chinachem, but Henan Tianguan is looking for support. Henan Tianguan was originally a big player in the alcohol industry. Its original investment in converting fuel ethanol was about 1,000 yuan less than the other three companies. Recently, Henan Tianguan Group laid an foundation for the annual production of 3,000 tons of straw fiber ethanol project. This is the first 1,000 tons of fiber ethanol industrial trial production line in China, and its technical capabilities have also been proved. At the meeting on biofuels, the National Development and Reform Commission has clearly stated that it no longer encourages the use of grain as a raw material for the production of biomass energy. Therefore, there is reason to believe that enterprises that do not use grain as the main raw material will be the key target for funding.

Another highly-respected company, Fengyuan Biochemical (000930), has obvious advantages in terms of technology and scale in the field of bio-fermentation. However, to further increase the level, the company will face development bottlenecks in terms of capital, management, and raw material supply. Recently, Fengyuan announced that its controlling shareholder Fengyuan Group intends to introduce China High-tech as a strategic investor. Wang Dewen, deputy general manager of Fenghua Biochemical, stated that Zhonggaoxin is the first company to contact Fengyuan, and its capital strength is strong. ""

After the news of the contact between Zhonggaoxin and Fengyuan, COFCO also stepped in and intended to cooperate with Fengyuan. COFCO has already involved in ethanol production and intends to use ethanol as its business development direction. Liu Shukun analyzed that Fengyuan and COFCO cooperation, in addition to helping Fengyuan solve capital problems, can also help Fengyuan integrate the existing non-ethanol industry. "The two will realize complementary advantages in biological fermentation, capital, management, raw material supply, and integration of related industries, and are expected to use Fengyuan as a platform for the integration of new energy and new materials industries across the country."

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