After months-long attempts to persuade Vietnam to reduce the most favored nation (MFN) tariffs on U.S. ethanol – the lowest possible tariff a country can assess on another country with the most favored nation status – the U.S. Grains Council (USGC) anticipated a five-percentage point reduction on import tariffs for ethanol into Vietnam. In October, the Council and the Vietnamese Ministry of Industry and Trade signed the official memorandum of understanding – a win-win for both U.S. farmers and agribusinesses looking to export more ethanol to Southeast Asia’s fastest-growing economy and for the Vietnamese government.

Officials in Vietnam are looking to increase a national fuel blend mandate to 10 percent, and the reduction in tariffs for fuel-grade ethanol had the potential to expand trade to a market with a 170 million-gallon (60.3 million bushels in corn equivalent) ethanol deficit while still supporting Vietnamese tax revenue. Increased ethanol imports would support Vietnam in reaching its E10 nationwide goal and provide an incentive for the country’s ethanol industry to increase production and sales.

Vietnam does have a domestic ethanol industry, but local supplies cannot meet total demand to achieve the country’s current blend standard. Thus, Vietnam uses trade to support the fulfillment of its policy. Previously, imports faced tariffs of 17 percent for 100 percent pure ethanol and 20 percent for 99 percent or less pure ethanol.

As a result of these efforts, U.S. ethanol exports to Vietnam increased 12 percent from January to August 2020 from the prior year despite COVID-19 market contractions, amounting to 2.72 million gallons (10.3 million liters, equivalent to 965,000 bushels) valued at $6.6 million.

This potential market could grow even more if the Vietnamese government moves to an E10 blend mandate. That policy change would mean Vietnam could become a 218 billion-gallon (825 million liters) ethanol market, equivalent to 77.3 million bushels of U.S. corn.

Over the same period, other countries in Asia were also bright spots for U.S. ethanol sales: South Korea’s imports jumped as a result of the need for ethanol for hand sanitizer, and Indonesia removed a ban on U.S. ethanol, allowing product to enter the market by way of pre-blended fuel.

In May, the removal of a ban on pre-blended fuel changed Indonesia’s ethanol opportunities and created a potential market of more than 200 million gallons (71 million bushels in corn equivalent).

The market development efforts to accomplish this policy goal began in December 2017,

undertaken jointly by the U.S. Grains Council (USGC), Growth Energy, the Renewable Fuels Association (RFA) and the U.S. Department of Agriculture’s Foreign Agricultural Service (USDA’s FAS).

Already the fourth most populous country in the world, Indonesia is expected to grow to the sixth-largest global gasoline market within a decade. This increased demand for fuel is driven by members of the country’s rising middle class, who are dedicating part of their higher incomes to upgraded transportation options – especially from two-wheeled to four-wheeled vehicles.

At the same time, things were moving in a positive direction for U.S. ethanol in Indonesia, U.S. ethanol imports by customers in South Korea jumped in 2020 due to new needs for hand sanitizers. Even more important than the short-term sales, this uptick in demand is opening doors for the U.S. Grains Council and partners to build new opportunities for ethanol demand in Asia, for both industrial uses and fuel.

During the pandemic, domestic demand for ethanol for hand sanitizer in South Korea grew to 2.6 million gallons per month – more than 12 times pre-pandemic levels. The country had already been importing U.S. ethanol for industrial uses like windshield wiper fluid and disinfectants, but increased demand has led to more purchases.

South Korea imported 58.9 million gallons of U.S. ethanol (20.9 million bushels in corn equivalent) for industrial uses from January to July 2020, up nearly 53 percent year-on-year. This total constituted a 55 percent market share.

Ethanol destined for industrial-use applications helped stabilize overall U.S. ethanol exports in April and May 2020 amid a bleak period for fuel demand globally.

The world’s fuel markets were dramatically disrupted early in the year as governments instituted movement restrictions and released social distancing guidelines to address the COVID-19 pandemic. Industrial end-use markets – including chemical, solvent and consumer products – were impacted to a lesser extent as the pandemic triggered a substantial uptick for sanitizing and disinfecting products that also use ethanol as an ingredient.

Industrial-use markets typically account for 25 percent of total U.S. ethanol exports, bought for uses like windshield wiper fluid in South Korea and the European Union or bioplastics in India. As fuel demand began to decline in March, industrial ethanol exports started to represent a larger proportion of the export mix and help support overall U.S. ethanol exports.

U.S. ethanol exports for industrial uses equated to approximately 50 percent of total exports in April and May, at roughly 44 million gallons (15.7 million bushels in corn equivalent) and 33 million gallons (11.7 million bushels in corn equivalent), respectively. The remaining half of exports continued to supply fuel markets. India, Nigeria and the Persian Gulf remained strong purchasers of U.S. ethanol for industrial uses, while increases in exports to South Korea and Mexico were notable.

While COVID-19 will likely negatively influence the global ethanol market through 2022, the U.S. Grains Council (USGC) continues to work to expand the global use of the renewable fuel.

The Council has maintained and even expanded programs in certain markets to ensure the pandemic does not translate to lost years on global ethanol policy implementation or emerging trends that could positively impact the U.S. ethanol industry.