UK's largest bioethanol producer to decide on plant closure 'within weeks' after tariff blow

The UK's largest bioethanol producer, ABF Sugar, could be forced to make a call on closing its Yorkshire plant by as early as June 15, the company has said, as tariff waivers have triggered new uncertainty for the native market.

A challenging market environment first put ABF's Vivergo bioethanol plant on watch for potential closure in April, but conditions deteriorated May 8 when a new UK-US trade deal promised to scrap tariffs on imports of American supplies.

Speaking to the UK parliament's Business and Trade Committee June 3, Paul Kenward, CEO of ABF Sugar, said that the business lacks confidence to sign new contracts for the wheat feedstock processed in its Vivergo plant, which are up for renewal June 15.

"We need to make our next wheat orders for the plant if we want to keep it running beyond the next few weeks," said a spokesperson for Vivergo.

ABF is also due to host its scheduled board meeting in early July, presenting an unofficial deadline for the company to set out its next steps.

Stronger trade access to the UK market for US bioethanol producers was a key concession made under the US-UK trade deal in exchange for relaxed measures on British automotives and metals last month.

The proposed deal, which is yet to be made law, replaced 19% bioethanol tariffs imposed by the UK with a 1.4 billion liter quota, a volume roughly equivalent to the size of the entire domestic market.

As a result, ABF and its competitor Ensus have warned that new measures constitute an existential threat for the industry, and have demanded rapid policy support.

Policy demands

As part of its appeal for stronger policy support, ABF has called for higher ethanol blending limits and access to new transport industries

Kenward called on UK lawmakers to lift the legal limit for ethanol blending into UK gasoline, advocating for an increase from 10% (E10) to 15% or 20%.

Additionally, ABF is pushing for revised standards on bioethanol applications in shipping and aviation – where fuel made from food crops is currently penalized.

"I think that there are quite arbitrary restrictions in relation to SAF [sustainable aviation fuel] that could be looked at -- and we know that the interest is there," said the Vivergo spokesperson.

Under UK law, jet fuel suppliers are obliged to make up at least 2% of deliveries with SAF in 2025, rising to 10% by 2030.

In the interim, however, ABF has appealed for the government to make 150 million pounds ($203 million) available to the industry to offer short-term relief.

ABF is engaging with the Department of Business and Trade on a daily basis, and is working "in lockstep" with rival Ensus to coordinate its lobby, the spokesperson said.

"We've heard Jonathan Reynolds, the Secretary for Business, say that he is committed to acting within days, not weeks, but it's now been weeks since we had that meeting, and we still haven't seen any of the concrete developments that we need," she said.

Historic threat

Between their sites in Saltend, East Yorkshire, and Teeside in the UK's northeast, ABF and Ensus hold some 800 million liters/year in bioethanol production capacity.

US competition was first identified as a threat to the UK market as early as 2007, when EU lawmakers first levied tariffs on imported products.

Negative price movements for wheat-based producers have proved particularly challenging in the past year, as US suppliers using corn feedstock have remained unaffected.

Platts, part of S&P Global Commodity Insights, assessed T1 FOB Rotterdam ethanol barges at $559/cu m June 3, compared to the $726/cu m for T2 supply eligible for 'double counting' incentives in Europe.