China to Lift Ten-Year Ban on Construction of Corn Ethanol Plants Amid Record Corn Stocks

After a ban lasting nearly a decade, China is set to resume building corn ethanol plants once again as the country’s domestic corn stocks reach record levels topping 150 million tons.

China banned corn-based ethanol in 2006 when corn prices were rising and there was widespread concern over food security, switching instead to producing ethanol from cassava, sorghum, and non-grain feedstocks. The switch hampered production growth, however, due to a shortage in these non-grain sources.

China is the third largest ethanol producer after the U.S. and Brazil, producing 2.27 million tons in 2014, with 20% of its gasoline being blended with ethanol. And the plan to resume corn ethanol production will be a win-win for the country as it will use up the damaged corn stock in reserve while higher ethanol output could help alleviate pollution.

"Fuel ethanol is the only solution for the large number of deteriorated corn stocks, which are not suitable for human or animal consumption," said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd (JCI), who estimates that between 20 million and 30 million tons of stored corn was too moldy to be used for animal feed production.

Proposals have been advanced to build more than one million tons of annual corn ethanol production capacity, mostly in the country’s northeast provinces, with state-owned COFCO Co. Ltd. and Heilongjiang province both agreeing to build two ethanol plants, each with a capacity to produce 300,000 tons of ethanol per year.

Since crude oil prices are at their lowest since 2009, researchers believe that for China’s corn ethanol industry to be economically viable, it will need significant subsidies from both local and central governments, but add that it should be within reach for more affluent cities including Beijing and Tianjin, which need to reduce car emissions that are being blamed for damaging air pollution levels.

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