Ethanol Production: Rising Business Opportunities and Market Analysis

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Ethanol Production

Ethanol is amongst the most widely used forms of alcohol which finds application in multiple industries in an ingredient of alcoholic beverages. The major reasons behind the popularity of ethanol are its sterilization properties, which make it suitable for industrial use as well. Industries such as cosmetics, home care, health care, food and beverages, and pharmaceuticals use ethanol on a large scale, leading to steady growth in its demand. As a result, the total volume of the ethanol market is expected to exceed 128.3 billion liters by the end of 2025, as compared to the present level of 115.5 billion liters. This growth will be fuelled primarily by rising demand in Asia, which is both the biggest producer as well as consumer of industrial ethanol. The Asia Pacific region accounts for approximately 50 percent of the total consumption of ethanol globally and is followed by Europe, where the annual consumption exceeds 2.4 billion liters.

What is Ethanol?

As per Industrial Ethanol Association of Europe, ethanol is a type of alcohol which is produced by the natural fermentation of different biological materials including wheat, barley, and sugarcane. On the basis of source, ethanol can be identified as agricultural ethanol produced from the fermentation of sugar and starch-rich products, and synthetic ethanol produced from fossil fuels through chemical processes.

Rising Business Opportunities in Ethanol Production

The ethanol market is expected to continue to grow in the future as well, and the rising business opportunities in the field can be broadly categorized on the basis of end-use applications of ethanol.

  • Alcoholic beverages: – With the increase in disposable incomes and changes in lifestyle, demand for alcoholic beverages is steadily increasing in the Asia Pacific, Africa, and Latin America regions. Increase demand for alcoholic beverages offers excellent growth opportunities for the ethanol market. 
  • Cleaning products: – Commercial establishments are striving for better hygiene standards globally. Hospitals, diagnostic labs, restaurants, hotels, etc are increasing demands for cleaning products. As ethanol is used in all such products, it bodes well for the growth in ethanol demand. 
  • Healthcare industry: – With rising standards of living, people in developing regions like Asia Pacific and Africa are seeking better healthcare facilities. The pharmaceutical sector is also expanding at a steady pace across the globe. This has led to a rapid increase in the number of hospitals and labs, which are in fact big consumers of ethanol-based sterilization and cleaning products.
  • Transportation industry: – Ethanol is an important additive to fuels. With a rapidly expanding transportation and automobile sector in developing regions like India and China, the demand for ethanol will increase steadily. Automobiles are also being developed which can run on 100 percent ethanol, which will further drive the market.

Ethanol Market Analysis

The global ethanol market is segmented on the basis of feedstock used in the production. The major categories of ethanol globally are sugarcane-based ethanol, wheat-based ethanol, and coarse-grain based ethanol. The coarse grain segment is expected to perform better than all the other categories. The overall growth rate of the ethanol market is expected to be around 2 percent over the next few years.

Ethanol is widely used in the manufacturing of various types of solvents. Presently, the solvent industry accounts for almost 64 percent of the total demand for industrial ethanol. It is expected that the demand from the solvent sector will rise steadily over the next few years with the average annual growth rate being approximately 3 percent.

Chemical intermediaries account for almost 36 percent of the demand for industrial ethanol. End-user industries such as alcoholic beverages, chemicals, plastics, cleaning products, and paints are leading the demand for ethanol globally. It is expected that this segment will also witness a steady growth of around 3.6 percent per annum.

Due to the ever increasing requirement, the demand and supply gap for ethanol in Asia is presently increasing. Meanwhile, the more mature markets like the U.S. and Europe have a balance between demand and supply of ethanol and the trend is expected to continue in the future as well.

The expansion of the sugar industry in Brazil is expected to be the biggest factor for the expansion of the ethanol market in the Latin American region. With the low-costs of labor and low production costs, the sugar industry in Brazil is projected to expand rapidly in the coming years, driving the demand for ethanol.

Market Challenges

There are certain developments that are creating impediments to the growth of the ethanol market. Firstly, the availability of raw materials for ethanol is erratic which drives up the price, creating problems for manufacturers. Secondly, there are plenty of alternatives available for alcoholic beverages, creating a problem for the expansion of the ethanol market in the alcoholic beverages industry. Thirdly, electric cars are being promoted by governments all over the world. As these cars do not use liquid fuels that have ethanol, the demand for ethanol in transportation and automobile industry might dwindle in the future.

Despite the problems being faced by the ethanol industry, the overall outlook for the expansion of the ethanol market is promising. Demand is expected to go up with the growth of multiple end-user industries, presenting attractive business opportunities in the market.