Development and Reform Commission to Promote Fuel Alcohol Gasoline Ethanol Industry

The recent decline in international oil prices does not delay the development of alternative energy sources. The reporter recently learned that the National Development and Reform Commission and other officials will further promote fuel ethanol gasoline and plan to increase the fuel ethanol production capacity from the current 1.02 million tons to 5 million tons by the end of the “Eleventh Five-Year Plan” period. In addition, the country will set strict market access conditions and use the bidding method to select manufacturers. However, of the newly added 4 million tons of capacity, the existing 4 pilot companies are still the main bearers.

500 million tons of fuel ethanol blended with ethanol gasoline reached 40 million tons, which accounted for only 60% of the market for gasoline. In this way, the growth space of these four companies in the next few years “has no ceiling”.

The pilot area was expanded in April 2001. At that time, the State Planning Commission formally announced the promotion of the use of vehicle ethanol gas. The reason why this is the case is that the first is energy substitution and the other is to solve the problem of aging grain.

According to the special plan, the state approved four pilot fuel ethanol projects with a capacity of 1.02 million tons, namely Jilin Fuel Ethanol Co., Ltd. (hereinafter referred to as “Jilin Ethanol”), 300,000 tons/year, and Henan Tianguan Fuel Alcohol Co., Ltd. (down It is called "Henan Tianguan") 300,000 tons/year, G Fengyuan (000930) 320,000 tons/year and Heilongjiang China Resources Alcohol Co., Ltd. (hereinafter referred to as "China Resources Alcohol") 100,000 tons/year.

From June 2002 to June 2003, the state organized pilot provinces and cities such as Henan Province and Heilongjiang Province to carry out pilot trials of ethanol fuel for vehicles. In 2004, the pilot was expanded to include the provinces of Heilongjiang, Jilin, Liaoning, Henan, and Anhui, and Hebei, Some areas in Shandong, Jiangsu and Hubei provinces.

In view of the energy substitution effect of ethanol gasoline, the relevant departments plan to consolidate the existing 9 provinces and cities that are closed and operate. The next step will be to implement closed operations in Guangxi. In addition to Shanxi Province in the central and eastern regions, including Beijing, Tianjin and the Yangtze River Delta, The Pearl River Delta and other countries basically achieved market closure. And research and promotion of high-blend flexible fuel vehicles.

The real problem is that the current capacity of 1.02 million tons is far from meeting the needs of the market. In the “Tenth Five-Year Plan”, it was determined that the market share of ethanol gasoline in Henan Province was 75%, and the consumption of fuel ethanol was 130,000 tons per year. However, in fact, the consumption of the province in 2005 reached 230,000 tons, and the market share of ethanol gasoline reached more than 95%. Therefore, we need to further expand our production capacity.

It is understood that the relevant departments expect that by 2010, fuel ethanol production capacity will reach 4.5 million tons, accounting for 5.88% of the consumption of gasoline that year; promote the use of ethanol gasoline 37 million tons, accounting for 55% of the share of gasoline used in vehicles.

However, who will bear these new capacity? Because of the state's financial subsidies, the current production companies have low-profit guarantees. Moreover, the current production companies are making comprehensive use of them to improve the economy of the industry. Some of the by-products of each ton of fuel ethanol can already cost about 1,000 yuan.

According to industry sources, the production layout of fuel ethanol should be built in areas close to raw materials such as cassava, sweet sorghum and corn, close to the consumer market, close to the feed industry, and well-developed aquaculture industries, and have a reasonable economic scale. During the “Eleventh Five-Year Plan” period, the country implements the policy of fixed-point production, principled circulation, and proper competition for fuel ethanol. The project construction needs to be approved by the National Development and Reform Commission and will be produced by designated enterprises.

“Because the promotion of fuel ethanol is a major strategic move of the country, we must standardize the market in the promotion and use, and at the same time expand the market capacity to ensure the smooth realization of the national energy strategy. Therefore, the state has very strict market access, and investment entities must have better The basis of technology is to give priority to the existing fixed-point fuel ethanol production enterprises.” A top-rated fuel ethanol production company executive said to the “Securities Market Weekly” that “the investment amount of fuel ethanol is relatively large, and the relevant departments need the ability of enterprises to resist risks. Strong, therefore, the relevant departments in principle continue to rely on the existing four companies for production, but the state liberalizes the market supply area and encourages competition between the four companies."

It seems that before 2010, fuel ethanol companies, especially the existing 4 fixed-point companies, will share the benefits of energy alternative strategies to the greatest extent.

The four companies “points” the formation of the current ethanol gasoline only covers nine provinces and cities nationwide, with a capacity of only 1.02 million tons, in the face of huge market demand, the four fixed-point enterprises of fuel ethanol face the biggest problem is how to quickly increase production capacity, Grab bigger market share.

According to the publication, one of the four manufacturing companies has already signed letters of intent for the acquisition of two large-scale alcohol manufacturers in different provinces and autonomous regions, and plans to expand their production capacity by means of holding acquisitions and achieve localized production.

In the battle for market share, the four companies are facing different environments. At the time of piloting, in order to reduce transportation costs, four fixed-point enterprises divided the target market according to the transport radius and transport and unloading capacity. Now it seems that under the current market and production layout, Fengyuan and Henan Tianguan will expand in the market in the future. There are more space advantages.

China Resources Alcohol is located in the northern end of Heilongjiang Province. At that time, its target market was the province, and its remaining production capacity was supplied to Jilin Province. However, Jilin Province's Jilin Province has large ethanol production capacity and strong market coverage, which will restrict the sales of China Resources Alcohol to Jilin Province. Inadequate expansion capacity unless the province invests in new production bases.

Moreover, methanol gasoline is currently competing in the market for gasoline gasoline, especially in Shaanxi, Inner Mongolia, and Sichuan. This will bring geographical constraints to the expansion of Heilongjiang and Jilin provinces.

Methanol gasoline is a cheap, clean vehicle fuel that is made by blending 15% of coal made from methanol with 85% of gasoline plus a certain amount of additives. Methanol originates from coal, natural gas, coke oven gas, coalbed methane, and nitriding industries.

In 2003, the relevant departments of the country included alcohol fuel in the “National Alternative Energy Development Plan” and recommended that it be tested and promoted first in Shanxi Province. According to statistics, in 2003 and 2004, the consumption of methanol gasoline in Shanxi province was above 10,000 tons. The goal of Shanxi Province is to build a national fuel methanol production base and strive to produce 10 million tons of methanol fuel production capacity by 2010.

Break through the profit dilemma In addition to the competition outside the market expansion, companies are also looking for more ways to replace raw materials in order to break the current loss dilemma.

At present, corn is used as raw material to produce ethanol, and about 3.3 tons of corn are used to produce 1 ton of ethanol. The market price of corn is about 1,400 yuan per ton, and the raw material cost is only 4,620 yuan per ton. The price for selling to PetroChina and Sinopec is about 4,700 yuan per ton, coupled with labor costs, electrical costs, etc. Losses are difficult to avoid. In order to encourage the promotion of ethanol gasoline, the state has formulated a policy of “guaranteeing low profits” for ethanol companies. Calculating the profit per metric ton of fuel ethanol, the subsidies for alcohol plants will be calculated. The current subsidy is 1300-1600 yuan per ton. At present, anhydrous alcohol is 6,000 yuan/ton on the market, and the production of ethanol by enterprises is actually a loss.

People in the industry generally believe that a product that does not have cost and price advantages and cannot demonstrate comparative benefits cannot be accepted by the market. The use of ethanol gasoline for vehicles must be promoted in a large area, and the cost must be lowered down. After all, the national subsidies for food are not a long-term solution.

According to reports, the current domestic production of ethanol is mainly based on grain as raw material, but with the rising demand for fuel ethanol as an alternative energy source, the debate on food security has become increasingly fierce. The search for an ideal alternative raw material has become the focus of research.

On August 28 of this year, Henan Tianguan Group invested an annual output of 3,000 tons of fiber ethanol project, which is the first domestic production line for fiber ethanol. This project broke the past history of simply producing ethanol from food raw materials, making it practical to use straw fiber raw materials to produce ethanol. This not only makes the use of straw waste scientifically, but also saves the country a lot of food.

Zhang Xiaoyang, chairman of Henan Tianguan Group, said that the total investment of the 3,000 tons of fiber ethanol project that the group is currently constructing is 51 million yuan, and it is planned to be completed and put into operation in the first half of 2007. After the project is put into production, 18,000 tons of corn stalk fiber raw materials will be digested each year.

If the substitution of raw materials can be solved, and the enterprises further improve the comprehensive utilization, even if there is no financial subsidy afterwards, fuel ethanol may also have market competitiveness.

The marketing of ethanol gasoline for motor vehicles is provided by CNPC and Sinopec, and the deployment center is in principle transformed by the two companies in the sales regions of their respective participating fuel ethanol companies, in accordance with the planning scheme, and relying on the existing oil depots. It is understood that Jilin Ethanol is controlled by PetroChina, Henan Tianguan and Fengyuan are jointly held by Sinopec, and China Resources Alcohol is wholly owned by COFCO. As of the end of February 2006, within the scope of the pilot, CNPC built 88 central deployment centers, invested 660 million yuan, and sold 6.745 million tons of ethanol gasoline; Sinopec built 59 deployment centers, invested 550 million yuan, and sold 4.37 million tons of ethanol gasoline.

The sales price of fuel ethanol was multiplied by 0.9111 in accordance with the ex-factory price of gasoline No. 90 announced by the Development and Reform Commission in the month. The loss formed by the production enterprises was subsidized by the state finance. In addition, during the pilot period, the consumption tax of 5% of the production enterprises was also exempted, the VAT was collected first, and the paid use fees for the newly-added construction land were turned over to the central government for implementation of the first levy. Since the pilot project, the central government has allocated 4 billion fuel ethanol producers a loss allowance of 2 billion yuan.

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