Ethanol producers are turning to alternatives to combat depressed prices and slim profit margins, Bryan Cave LLP said in an alert last week.
The US ethanol industry is expected to reach record output in 2017, which, combined with current high inventories, has put pressure on ethanol prices. The article cites Markets Insider data according to which the price of ethanol is now 42.5% lower than five years ago.
Some ethanol producers have responded by idling production facilities, and others have opted for alternative uses for their plants. Recently, Archer Daniels Midland and Green Plains, two of the largest players in the sector, decided to switch part of their capacity for fuel ethanol production to beverage and industrial alcohol, the law firm points out.
Also, ethanol producers can retrofit existing plants to diversify into the production of n-butanol, an alcohol used as a feedstock for specialty solvents for a number of products, including paints and coatings, engineering plastics and cosmetics.
According to Bryan Cave after five years of depressed profits, diversification may be key to the long-term success of ethanol producers.
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Ethanol producers move to diversify