China dangles larger tariff as US ethanol gets into its export stride

Timely ethanol import data from the Chinese government has underscored a potential snub on US exports, as China imported more US ethanol in February than at any other time in the last two years.

Over 189,034 mt made the trip with a value of $82.8 million, according to the data, doubling the volume exported in January which reached 91,283 mt.

The data was released as China warned that it would add US ethanol exports to a list of potential tit-for-tat tariff targets that could hike prices following the US' decision to impose duties on steel imports.

"China’s response was entirely predictable... It is my fervent hope that the White House now fully understands the impact these actions will have on America’s ethanol industry and farmers," Bob Dinneen of the Renewable Fuels Association told Agricensus via email.

China had already imposed duties on US ethanol exports at the beginning of 2017, which saw flows to the country slow to a trickle.

However, as China adopted biofuel mandates to curb excess domestic corn stocks, ethanol demand has risen and with the US pricing competitively enough to overcome the duty, the door to imports was kicked open in late 2017.

From December, US ethanol exports into China rose significantly, ending a barren 2017 on a high note as 528,000 barrels – around 72,000 mt – departed from the US for China, EIA data shows.

For the US ethanol sector, frustrations in leveraging greater use of ethanol domestically has seen the sector target export opportunities to continue its spectacular growth, with the USDA now anticipating ethanol production will hoover up 5.575 billion bushels of US corn in 2017/18.

That’s well over a third of total US corn production, but the strategy may founder as trade war fears mount, sparking recriminations and retaliation.

"China’s threat to retaliate with additional tariffs on our ethanol comes at a terrible time. Rural America cannot afford domestic and foreign restrictions on the use of renewable fuels," Brian Jennings of the American Coalition for Ethanol said via email.

"China urges the United States to resolve China’s concerns as soon as possible, resolve differences through dialogue and consultation, and avoid harming the overall situation of Sino-US cooperation," a spokesman at the Ministry of Commerce said early Monday.

China currently places an import tariff of 17% on US ethanol.