(Reuters) - Many U.S. ethanol plants have slashed production over the past week or idled entirely as the coronavirus outbreak cut into fuel consumption and cratered margins to refine the corn-based fuel, the head of a biofuel trade group said on Thursday.
Renewable Fuels Association Chief Executive Geoff Cooper said on a conference call he expects ethanol production to fall further, and called on the U.S. Environmental Protection Agency to ease strain on the industry by ceasing to grant small refineries waivers from the nation’s biofuels mandates.
The spread of coronavirus has disrupted business, travel and daily life. As governments urge people to stay indoors to curb the outbreak, fuel demand has tapered.
Margins to produce ethanol, which the United States requires to be blended into the nation’s fuel pool, have tanked, prompting concern about plant shutdowns and layoffs. Ethanol refining margins in the Corn Belt fell to as low as -11 cents a gallon in early March and currently sit at 10 cents a gallon.
“We’re doing everything we can to make sure we can survive and weather the storm but it’s definitely going to be ugly,” Randy Doyal, chief executive of Al-Corn Clean Fuel in Claremont, Minnesota, said during the conference call hosted by RFA.
Some 200 plants across the United States produce just over 1 million barrels per day of ethanol.
The industry employs about 350,000 workers either directly or indirectly, Cooper said.
Doyal’s plant produces about 120 million gallons of ethanol per year and employs just over 50 workers, he said.
“The impact is so great on our local rural communities that it would be tragic to have these shutdowns,” Doyal said.
Some companies have shifted production to take advantage of a market that has seen a surge in demand: hand sanitizer, which can be made using ethanol. Governments and health agencies have advised people to wash their hands and use hand sanitizer to mitigate the virus’ spread.
“We’ve tried to shift our focus and supply as much on the hand sanitizer markets as we can,” said Chad Friese, general manager of the Chippewa Valley Ethanol Co in Benson, Minnesota.
The duration of the industry’s downturn - and the severity of run cuts - remains uncertain as much is unknown about the aftermath of the coronavirus.
“We’re going through something most of us have not experienced during our lifetimes,” said Scott Richman, RFA chief economist.
Reporting by Stephanie Kelly, editing by Richard Valdmanis, Chris Reese and Tom Brown