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dan45mcc

Fight China's Smog with Ethanol (NO NO NO)

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H NO.. this looks like nothing more than a move to EXPORT huge and it would be HUGE amounts of ethanol to China..  which in turn would RAISE the price of ethanol.. which means HIGHER E85 prices  (as a Ethanol Investor sure you want to see that ..as a Consumer H no you don't want huge export demand on ethanol)

 

 

Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors Inc. While a doctoral candidate in aeronautical engineering at Princeton, Chen found his investment strategies were so profitable that he put his Ph.D. on the back burner. He employs a value-oriented approach and often demonstrates excellent market timing due to his exceptional technical analysis.
 
The Energy Report: In your newsletter, What Is Chen Buying/Selling?, you make the argument that China is a potentially important market for ethanol. Why is that?
 
Chen Lin: On my visit to China last summer, I experienced the air pollution problem firsthand. The No. 1 concern of the Chinese people is the huge blanket of smog covering major parts of China. How would you like to breathe smog every day? The good news is that because ethanol contains oxygen, it can significantly reduce smog from car emissions. In the U.S., it is very common to blend 10% ethanol into gasoline to reduce pollution.
 
In the U.S., ethanol is priced much cheaper than gasoline. In the futures market, gasoline is trading at $2.80, while ethanol is at $1.80. These prices change every day, but right now, that is a spread of $1. The truth of the matter is that it is much cheaper to run cars on ethanol than gasoline.
 
But there is a shortage of ethanol in China, and only a few places sell blended gasoline. There is great potential for China to massively import ethanol from the U.S. in order to reduce pollution and cheapen motorists' gasoline.
 
TER: Does China have the potential to produce its own ethanol?
 
CL: China is a food importer. China imports corn; it imports soy beans. Inside China, food costs are much higher than in the U.S. It is not at all economic to use corn in China to make ethanol.
 
TER: How can junior firms developing ethanol resources benefit from the increased use in ethanol in China and around the globe?
 
CL: Corn is the main cost for the junior ethanol producers. And the corn price is at a historical low, thanks to the huge harvest last year. We know that corn runs in multiyear cycles. Inventories build up. As a result of this large supply, ethanol producers' margins are at historical highs. If China's imports pick up, the ethanol price will go even higher. In conclusion, the margin for ethanol producers will be very high for at least a year or two. China is a big wild card. If China starts to import a large quantity of ethanol, we could see a multiyear bull market.
 
TER: Do you think the government would put any barriers on the import of ethanol, or would it encourage it?
 
CL: The main concern of the Chinese government and the Chinese people is pollution—not the gross domestic product. Smog sickness overrides almost anything. In November of last year, for the first time in many years, China started to import a significant amount of ethanol from the U.S. This could be the start of a trend of ever-increasing imports of U.S. ethanol.
 
TER: Are the engines of cars that are used on Chinese roads less efficient in terms of pollution than engines used in the U.S.?
 
CL: General Motors Co. (GM:NYSE) is one of the largest car producers in China, so the engines are quite similar to ours. We can fuel our engines with 10% ethanol. Brazil uses a 25% ethanol blend. China has basically no ethanol in its gasoline. The whole point of ethanol is to reduce pollution. I do not see any barriers ramping up the use of ethanol: I see a potentially dramatic increase in ethanol exports from the U.S. to China.
 
TER: If and when ethanol markets increase in China, how will that impact the refining industry for that product?
 
CL: Some gasoline refineries in the U.S. are also ethanol producers—such as Valero Energy Corp. (VLO:NYSE). Valero just reported huge earnings and a huge profit jump in its ethanol product line for Q4/13. Now may be the time for the larger ethanol producers to buy up the junior ethanol companies at low prices.
 
 

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Can China grow its own corn?   Build its own ethanol plants?  Better yet, build second generation ethanol plants that utilize various feedstock to produce ethanol?     Anyone thinking ahead of the curve?  Or what they really need is a bunch of good old American politicians telling them what to do!

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According to the CIA World Factbook, only 11.62% of land in China is arable (farmable), and since they do grow other crops like rice, I don't think its possible to grow enough corn to sustain themselves on as much ethanol as we do here. That being said, ethanol can be made out of almost any organic matter. One of the more consistent, durable crops out there is actually switchgrass. It would be awesome if they could have rooftop switchgrass gardens in major China cities like Hong Kong or Shanghai... minimizing the risk of trash getting in there, lowering energy costs (through less heat absorption into buildings), and multi-tasking with land which would add additional resource availability.

 

Idk, just a thought.

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I wonder if there is any municipal solid waste over there going to landfills.

 

 

 

 

 

Bingo !.. Yeah that would be the perfect scenario for them ..

 

Even after recycling, massive amounts of municipal solid waste are left in China requiring disposal. Most of this residual waste ends up in landfills, but landfill design and construction is still evolving and the ratio of landfills to people is much lower than in other countries.
by Xu Haiyun
The amount of municipal solid waste (MSW) collected by local authorities in China has increased in parallel with rapid urbanization. Urbanization in this context means simply an increase in the number of cities and urban areas. The average rate of increase in the amount of MSW collected annually is about 6%.
In 2006, 656 cities across China generated around 148 million tonnes of MSW (Table 1) for disposal in 419 facilities. This is the quantity of waste for disposal after recycling activities in 2006 alone. Unsurprisingly, this sizable amount presents a significant challenge in disposal terms. What options are available for this residual waste?
 
 

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This is where MSW to ethanol will REALLY shine...  plants in world mega cities (Bejing, Shanghi, Tokyo, Jakarta...) where there is a LOT of trash, with air quality issues...  ethanol produced on site, and distributed on site virtually no transportation of feedstock or product.

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Coal power generation is largely responsible for the smog in China, not automotive exhaust. They're barking up the wrong tree.

 

In 2007 I was invited to Suzhou to train engineers in our China division. Suzhou prohibits all two-cycle engines so most of its vehicular traffic is comprised of bicycles and electric scooters. There were autos, but even at the height of rush, they were outnumbered 30 to one.

 

I arrived the day after the remnants of a typhoon had swept the air clear. My colleagues retracted accusations of altering photos I had sent them to highlight the blue skies. They were taking snaps like crazy to record these days for posterity.

 

The visibility from my 45th floor hotel room was phenominal. I could make out much of the landscape as much as eight miles distant. Three miles away, however, with smoke stacks that towered as high as my hotel room, was the nearest coal generation plant belching brown/grey smoke.

 

By the third day of my visit, the smog had reduced my hotel room window visibility to the point where the smoke stacks were merely hazy outlines. By day six, I couldn't see the stacks and the air has a dusty taint. As I got used to the persistant odor, food started tasting bland.

 

The last day of my stay was uncomfortatble. I started to experience respiratory heaviness and while washing up, I started hacking up brown-colored sputum. A majority of cyclists and pedestrians we passed as we left the city had donned particle masks. The air quality improved markedly and incrementally as we made our way to Shanghai. Shanghai, though far more densely populated, is not nearly as polluted due to the ocean breeze.

 

China is doing their damnedest to promote green energy -- all new highrise construction we passed featured pv and thermal solar panels on southern facades, some even shaded the room air conditioners that jutted from each apartment. They are just growing too fast to surrender coal generation and they are paying the price with diminishing public health.

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Morning Storky

 

Nice post .. Yes absolutely coal plant emissions is China's #1 issue.  Sounds like China is starting to take pollution issues seriously, getting the 2 cycle engines off the road , dismantling old in efficient coal plants and replacing with new "clean" coal plants  (well as clean as coal can be anyways), trying to capture the carbon dioxide etc...  lowering  vehicle smog is part of that cleaner path as well

 

 

Back to MSW for China ..did you ever visit any of their landfill operations ..are they 1950's USA style or have they started modernizing them as well and sorting recyclables?

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 have they started modernizing them as well and sorting recyclables?

 

with their population, and lack of resources to meet this population, much less their MASSIVE export market...  I would think that they would have to be into sorting recyclables... 

 

Have you ever noticed the quality of the cardboard that their products are shipped in?  This cardboard has been recycled SO MANY times, and has such fine soft grains... you could practically used Chinese corrugated cardboard for toilet paper!  I read an article about the recycling plant here in Omaha that stated that virtually all the paper is compressed into solid bales, and stacked inside shipping containers bound for China.  Much of the plastics are as well.  Then the plastics get made into cheap trinkets and toys, the paper into boxes to package the trinkets/toys, and shipped back in the same shipping containers...

 

I can't imagine that they would not have set up their own recycling facilities such as this to give them a domestic source of these raw materials.

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I did not witness any landfill operations, Dan. I think the coal pollution issue grows from a lack of scrubbers. Having commuted past a coal plants in Chicago in the 1970's the obvious effects of scrubber installation was the smoke color changing from orange-gray to mostly steam-like.

 

Shy of emissions controls, China, does their best to wring every last watt of energy from their coal plants. Alongside their newly constructed highway system are steam pipes that dimish from 6' diameter down to 2' after branching off to deliver heat to adjacent homes and businesses. Cogeneration is a fantastic way to increase fuel efficiency. I guess they'd just never taken the time to calculate the emission output as part of the energy equation . . until now.

Edited by storky

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