Recent policy changes in Malaysia and Vietnam open opportunities for US ethanol exports

In Vietnam, recent policy changes in Malaysia and Vietnam have opened significant market opportunities for U.S. producers, underscoring the region’s support for ethanol’s utility as a clean, affordable energy source. Last week, the Vietnam Ministry of Industry & Trade announced a new roadmap for fuel ethanol use that will expand the country’s ethanol integration to five and 10 percent blending rates for all road fuels.

The new E5/E10 policy announcement follows multiple years of intensive support of Vietnamese government and industry stakeholders by the U.S. Grains & BioProducts Council (USGBC) and the U.S. Department of Agriculture’s Foreign Agricultural Service (USDA’s FAS) to both migrate Vietnam’s ethanol policy to the entire gasoline pool and reduce U.S. ethanol’s tariff incidence.

Beginning in January, Vietnamese fuel distributors will begin transitioning RON95 gasoline to an E10 blend, with all RON95 gasoline required to be blended at that rate by June 1. RON95 fuel currently accounts for 80 percent of the country’s gasoline consumption and contains 0 percent ethanol, marking a sizeable rise in overall demand.

Fuel distributors will be allowed to continue selling E5 RON92, which currently accounts for 20 percent of the country’s gasoline consumption, until the end of 2030. Fuel distributors are permitted to migrate to E10 RON92 before this date on a discretionary basis but must transition RON92 to E10 by 2031.

In other news from Southeast Asia, U.S. producers will soon see more competitiveness after the U.S. – Malaysia Reciprocal Trade Agreement, announced in October, included the immediate removal of the import duty on U.S. denatured ethanol. U.S. undenatured ethanol is also included in the trade agreement’s tariff reduction schedule, though the tariff for undenatured ethanol will be incrementally reduced annually over a period of nine years until the tariff reaches 0 percent.