Is Hand Sanitizer a Sustainable Alternative for Ethanol Plants?

USFR-CUSTOMER SUPPORT 9.05.20
As ethanol plants try to recover from the sudden drop in ethanol plants, is the hand sanitizer market a sustainable alternative for production? John Phipps addresses the topic in Customer Support. ( Green Plains )

Tom Ashbacher asks about other markets for ethanol.

“Any chance the idle ethanol producers can start making some hand sanitizer-compatible alcohol?”

This idea popped up in the ag and general media as ethanol plants began to shut down due to lower demand for fuel ethanol. As usual any industrial switch like this has multiple moving parts. First, the size of the sanitizer market. Hand sanitizers are roughly 70-75% ethyl alcohol, with the balance mostly glycerin. Hard numbers on the number of gallons of ethanol needed are available from industry sources but only via very expensive market data firms. However, there are several forecasts about sales volume. The most optimistic is a global sales growth to $2B by 2026. If we use a typical Amazon retail price of $30 per gallon, that equates to an ethanol demand around 500 million gallons. This is global demand remember. Annual global ethanol production is 30 billion gallons, roughly half of which is American. The sanitizer market could grow to be around 2% of fuel ethanol production. These numbers are inexact but should give us some framework.

The first problem the relatively small size of the sanitizer market. There are other obstacles. Ethanol for fuel is industrial grade and can contain some trace impurities that are harmless in engines. Not so for consumer products, which require a more refined and purified version called pharmaceutical ethanol. Upgrading even a small plant to this higher standard is expensive. It is much more likely that beverage ethanol producers could switch to supply sanitizer demand. Meanwhile gasoline demand is showing some signs of recovery, so ethanol producers are in facing a tough decision. How long and big will this new market be? What if a vaccine gets us back to normal fuel ethanol demand in a year of so? Add on top of that the impact of oil prices, corn prices, and the usual ethanol production economics – which have been pretty sad for some time. Finally, the sanitizer ethanol demand already has existing specialty ethanol suppliers who probably won’t give up market share easily, clouding any profit forecasts.

So my answer is yes, plants could make the switch, but it wouldn’t replace much demand and almost certainly would be at best a short-term, low-profit alternative.

 

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