Ethanol plants temporarily idle during 'margin squeeze'

By Holly Jessen | June 21, 2012

Two Nebraska ethanol plants and an Arizona plant have revealed plans to temporarily idle until market conditions improve. It’s likely other companies are doing the same, but without taking the news public.

Valero Energy Corp. confirmed it had temporarily idled its 120 MMgy plant in Albion, Neb., on June 19. The company hopes to restart the plant in time to take advantage of the new corn crop. “We’ll restart it as soon as market conditions improve and allow for restart but we definitely expect that before the fall harvest,” Bill Day, executive director of media relations said, adding that Valero’s nine other plants are still operating.

Corn prices are up, especially in the area around Albion, Day said, meaning negative margins. “When that turns negative, it’s not economic to run the plant anymore,” he said. Valero doesn’t expect the current situation to last long, he added.

Keith Kor, general manager of Pinal Energy LLC, confirmed that corn prices are key to temporary shutdowns. The 50 MMgy ethanol plant in Maricopa, Ariz., is going to hot idle on July 1. “With the old crop corn being tight, the basis to get the corn here to Arizona costs more. That’s a squeeze on the margins,” he said. “Depending on what new crop corn looks like, that’s just kind of the big factor.”

All employees will be kept on and will perform maintenance tasks while the Pinal Energy is in hot idle. The company will also investigate whether the plant should upgrade to combined heat and power, which would mean installing a high pressure boiler for steam to run the plant and a turbine to generate electricity. “We are looking at ways to become more efficient,” Kor said.

Pinal Energy was also among a group of ethanol plants that slowed production rates in late February. At that time the company elected to a 10 percent reduction.  

The third plant to recently announce plans to idle is NEDAK Ethanol LLC. The company announced June 18 that it would temporarily idle its 44 MMgy plant in Atkinson, Neb., to conduct spring maintenance. The company pointed to negative crush margins and said it would monitor the corn and ethanol markets to decide when to start production again. "We hope to resume production as soon as we have completed our spring maintenance and the crush margins have returned to a level that will enable profitable production,” said President and General Manager Jerome Fagerland in a prepared statement.