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Novozymes eyes increase in US ethanol output

26 Apr 2017, 11.18 am GMT

Novozymes eyes increase in US ethanol output

Barcelona, 26 April (Argus) — Danish biotechnology firm Novozymes said it expects a slight rise in US ethanol output in 2017, after an increase in production in the first quarter of the year. But the company says US demand is down and inventories in the country are rising.

The firm said it had boosted sales of its enzymes to US bioethanol producers in the first three months of this year, helping grow sales of its bioenergy segment to 681mn kroner ($100mn) up by 9pc compared with January to March 2016. Novozymes said this was the result of estimated US ethanol output rising by 4pc in the first three months of this year, set against the first quarter a year ago. The company said it expects US ethanol output this year to be "on a par or slightly up on 2016." It also expects second generation ethanol output to increase by an unspecified amount.

The increase in its bioenergy enzymes sales reverses a decline in 2016 when Novozymes said US ethanol producers were looking to cut costs, as profits remained thin. The company has been aided in the last year by the launch of new products and in part by the decline in the oil price, which supported gasoline demand in the US, into which ethanol is blended.

But the firm said today US ethanol consumption had declined slightly in the first quarter and inventories were building. "Margins came down in the first quarter," said head of bioenergy Tina Sejersgard Fano.

The EIA said inventories are around 23mn bl, up by 1mn bl on the year, with its most recent production data giving output of 993,000 b/d, up by around 6pc on the year. That inventory build "could lead to a reduction in production," in the rest of the year said Holk Nielsen.

In Europe Novozymes owns a 10pc stake in the 40,000 tonnes/yr Crescentino cellulosic ethanol plant in northern Italy, operated by Beta Renewables. The unit was first started up in December 2012 but it ran into familiar problems associated with plants aiming to create ethanol from straw and other biomass. Novozymes said the plant is still not at capacity.

The company also supplies enzymes to cellulosic ethanol plants in the US, Brazil and China, all of which have faced similar issues. But Sejersgard Fano said US cellulosic plants were having "more and more stable production," despite being only a small part of overall US ethanol output.

But the company has successfully launched a new corn innoculant Acceleron B-300 SAT, partnering biotechnology firm Monsanto, aiming to boost US crop yields. The microbe coats seeds of corn hybrids sold by Monsanto, with Novozymes estimating the innoculant's use will reach 4.5mn to 9mn acres of planted US corn in 2017. Monsanto's sells its seeds to around 45mn acres in the US, around half of all US corn acreage.

The firm increased its first quarter net profit to 772mn kroner, up from 745mn on the year.

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