Trade Focus: China

China is a country with limitless potential and ever-increasing possibilities. According to the U.S. State Department, trade between the U.S. and China has grown from $33 billion in 1992 to $538 billion in 2012. That is a 1,530 percent increase in just 20 years. That is why the Renewable Fuels Association recently joined a trip to China led by USDA Under Secretary Michael Scuse. The group, including the RFA’s Kelly Davis and Growth Energy’s Jim Miller, visited the lesser-traveled northeast region of China, home to 110 million people, to reinforce our current relationships in the region and develop additional markets for U.S. agricultural products including ethanol and dried distillers grains with solubles (DDGS).

The trade mission observed a rapidly growing economy in northeastern China while visiting the city of Dalian, home to 4.5 million residents. Signs of growth are everywhere, from new high-rise apartments forming a new skyline to the shift from street markets to grocery stores over the past 10 years. Families in China’s expanding middle class are eager to buy their first cars. Twenty million vehicles were purchased in China last year, compared to the approximately 14 million vehicles U.S. consumers will buy this year. Continued urbanization and rise in vehicle demand has led to an increased demand for gasoline.

The mission began with a focus on expanding agriculture markets in China. It included a visit to Huishan Dairy and the Chinese beef company Haoyue. Both were found both to be modern, fully integrated facilities utilizing DDGS. China is the leading importer of American DDGS. It clearly sees the benefit of the high-protein, lightweight, easy-to-ship feedstock. In March, China purchased more than half of all American exported DDGS, with Mexico and South Korea topping off the top three. March set the monthly record for U.S. DDGS exports. If the U.S. continues at the pace we’re going, we will break all previous records for DDGS exports.

The focus then shifted to expanding ethanol markets as the group toured the Sinopec fuel ethanol plant in Chanchun and traveled to Jilin to visit a 175 MMgy corn ethanol plant. Today, a large portion of China’s gasoline is actually blended with MTBE and low-level methanol blends. Ethanol is currently blended in only six Chinese provinces and accounts for less than one percent of the fuel supply. There is tremendous room for growth, but China currently bans the import of food-based ethanol. However, these restrictions might be removable at the provincial level, making it possible to find a location willing to change policy or start a new program that allows imports.

In addition to combatting the food myth, the delegation detailed the economic and environmental benefits of U.S. produced high-octane, low-cost ethanol to the National Energy Administration and state-owned oil companies in an effort to open China’s gasoline market to more ethanol.
RFA planted the seeds for American exports. Now we must tend the field and watch them grow.

Author: Bob Dinneen
President and CEO,
Renewable Fuels Association
202-289-3835