Brussels, 25 July 2019 – iEthanol, the European Industrial Ethanol Association (IEA), welcomes the successful negotiation of the Mercosur trade deal and wishes to provide the Commission with additional input with regard to the TRQ for ethanol. The Association represents close to 50% of the non-fuel ethanol producers in Europe and is active in supplying ethanol for the manufacture of spirits, vinegar, chemistry, ink, paints, pharmaceutical, perfume, disinfection and paint industries.

With over 60% of the volumes of ethanol produced by fermentation by our members, we would like to share some key facts about the non-fuel ethanol market, to provide support in defining ethanol allocations within the negotiated frame of the Mercosur agreement.

The provisional text of the new EU-Mercosur trade agreement from 28 June 2019, provides the following: 450 000 tonnes of ethanol for chemical uses, duty-free. 200 000 t of ethanol for all uses (including fuel), with an in-quota rate 1/3 of MFN duty. The volume will be phased in in six equal annual stages.

Herein we would like to provide some facts about the market, elements to consider as consequence for the industry as well as some recommendations.

  1. MARKETS

 The EU market of ethanol is today composed out of 69% fuel ethanol and 31% industrial ethanol. This in volumes represents according to FO Licht*:

  • Europe with a production of 4.4 million Metrics tons (MT) for fuel ethanol and 1.9 million MT for non-fuel ethanol (Beverage and Industrial)
    • EU Beverage ethanol represents around 0,8 million MT and
    • Industrial ethanol around 1,3 million MT. Out of this Industrial Ethanol portion, Solvents use represents 0,7 million MT and chemical use 0,59 million MT
  • Brazil produces over 6 times more ethanol than Europe, with a total of 28 million MT (20,8 million MT of fuel ethanol and 1,8 million MT non-fuel ethanol). (Sources: FO Licht)
  1. EXPECTED IMPACT ON MARKETS

The 450’000 MT quota will encompass (FO Licht, 2019) a staggering

  • 33%, of the existing total market for industrial ethanol (non-beverage) in Europe, and
  • 76% of the existing EU Chemicals market.

Should the 450.000 MT of chemical use not be restricted to particular applications but remain bound to the vague description “Chemical Market”, it would enter the “wider chemicals industrial market” and by interpretation could easily enter the solvent markets and the screen wash markets.

iEthanol members are already extremely worried by this FTA, looking at the comparative sizes of Brazil vs EU Ethanol productions, the comparative economies of scales, of cost structures and of marginal costs. The fact that the bulk of the quota goes to the comparatively small chemical market and represents 450.000 MT out of 590.000 MT (76%) of the existing Chemicals market described in paragraph 1 above, already seem very disproportionate to our industry. We therefore submit to your consideration to strictly limit these 450.000 MT to certain applications – i.e. into a positive list.

The members of iEthanol are for most part fermentation-based producers composed out of small and medium-sized enterprises. We represent family-owned businesses, small or medium cooperatives, all with a strong local and regional history of employment and long-term commitment. We kindly ask for the Commision’s support to allow these European businesses to remain active on the market for the long-term.

  1. RECOMMENDATIONS

iEthanol would like to express its view that it is of the upmost importance to define clearly the duty free 450.000 MT of ethanol for chemical use, as being part of the requested support to the chemical industry, aiming to replace current fossil-based chemicals with new renewable alternatives and responding to a growing market demand for bio-based products (e.g. bioplastics). Such chemical use has therefore to be clearly defined in the Mercosur FTA quota and restricted to Chapter 29, with a positive list encompassing volumes currently imported under inward processing licenses.

Examples of products eligible for such a positive list may include ‘ethylene’ (CN 2901 21 00), ‘acetic anhydride’ (CN 2915 24 00) and ‘succinic acid’ (CN 2917 19 20). Other organic chemicals of Chapter 29 may be considered if these are new markets. Existing uses should only be included in the list in the exceptional circumstance that ethanol is already being imported today under existing inward processing licences for the transformation into bio-based chemicals. This concerns for instance ‘acetaldehyde’ (CN 2912 12 00) and ‘ethyl acetate’ (CN 2915 32 00). Additional processing licences for organic chemicals may exist and may be considered as well.