Asia Biofuels market ProgressionGBEP – Bioenergy Week - Manila

GLOBAL LONG/SHORT POSITIONS

650,000cbm

industrial

700,000cbm fuel

250,000cbm

industrial

3.6 million cbm fuel 700,000cbm

industrial

250,000cbm

industrial 240,000cbm

industrial

200,000cbm

industrial

400,000cbm fuel

90,000cbm industrial

80,000cbm fuel

240,000cbm Fuel

100,000cbm

industrial

550,000cbm

industrial

380,000cbm

industrial

1.2 million Fuel

500,000cbm

industrial

Fuel 300,000cbm

Industrial

300,000cbm

2018 TRADE FLOWS INDUSTRIAL

ENA 160,000cbm

45,000cbm

80,000cbm

20,000cbm

200,000cbm

480,000cbm

30,000cbm

140,000cbm

36,000cbm

76,000cbm

US B Grade

ENA

REN

Synthetic

Brazil B Grade

2018 TRADE FLOWS FUEL

US – China: 350,000??

US – Brazil: 1,600,000cbm

US – AG: 250,000cbm

US – India: 400,000cbm

US – Philippines: 260,000cbm

Brazil – US: 600,000cbm

C. America – EU: 160,000cbm

US will start being

used for Japanese

ETBE which will

reduce Brazil

flows into US

?

ASIA PACIFIC MAPMandates by country

New Zealand

Australia

Indonesia

Malaysia

Singapore

Thailand The Philippines

China

India

Japan

South Korea

Taiwan

Mongolia

Pakistan

Sri Lanka

Burma

Nepal

China: E10 by 2020

Japan: ETBE

Philippines: E10

Thailand: E10/E20/E85

Indonesia: E3???

Australia: Various

India: E10

MARKET UPDATE - BRAZIL• Brazilian CS crop look set to be at 580,000 Mts for the year

• Sugar trading at >35% discount to ethanol ensuring that ethanol will generate the majority of the production – 65% - 35%

• Record domestic sales for hydrous as ethanol remain heavily discounted to mogas

• Bolsanaro’s victory in the Presidential elections has improved the Real currency which in turn has made gasoline imports cheaper, thus effecting ethanol values.

• Crude price and RBOB drop is having a huge downward effect on ethanol prices

• Continued rains in the Centre South have delayed harvesting and this has helped to maintain values domestically

• We do expect to see prices fall as the crush gets into full swing

SUGAR DISCOUNT TO ETHANOL JUN 19

CHALLENGES FACING US PRODUCERS• Corn values are driving negative crush margins throughout the industry

with no real upside expected unless they is a dramatic change to corn S&D

• Corn crop for 2019/20 will be significantly down on las year and this will push prices higher

• Because of the make-up of ASTM grade material, destinations are challenging, Brazil requires ANP, Europe EN grade and Philippines PNS. The only exception seems to be India and AG although volumes to the latter are limited

• With the Brazilian government curbing imports through the 20% import duty on volumes above 1.2 million cbm over 24 months, the US needs to find another market and with 70% import duty for China, destinations are limited

• EU import duty on US product has been lifted but GHG saving criteria and spec will limit volumes crossing the Atlantic

• What other markets are open to US fuel material?

DAILY ETHANOL PRODUCTION –THOUSAND BARRELS

Kb/day Kcbm/day

Production 1,096 174

Stocks 21,802 3,467

Demand 953 152

Implied

Exports

250 40

US CRUSH MARGINS

Margin Calculation ($/gal): Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Corn 453 458 464

Corn t-1 442 448 456

RBOB 1,80 1,73 1,71 1,68 1,54 1,51 1,48

RB t-1 1,80 1,72 1,69 1,66 1,53 1,50 1,47

Ethanol Sales Price ($/gal): 1,56 1,61 1,61 1,60 1,59 1,57 1,56

Eth t-1 1,53 1,55 1,55 1,55 1,54 1,53 1,53

Total Revenue 1,98 2,03 2,03 2,02 2,00 1,99 1,98

Total COGS -1,889 -1,880 -1,898 -1,898 -1,915 -1,916 -1,922

Gross margin cpg 0,09 0,15 0,13 0,12 0,09 0,08 0,06

Gross margin cpg D-1 0,11 0,14 0,12 0,12 0,08 0,07 0,06

Daily difference (0,019) 0,007 0,009 0,001 0,006 0,001 (0,003)

Opex -0,18 -0,18 -0,18 -0,18 -0,18 -0,18 -0,18

EBITDA (0,09) (0,03) (0,05) (0,06) (0,09) (0,10) (0,12)

Financial crush (0,06) (0,01) (0,03) (0,04) (0,07) (0,08) (0,09)

EU origin is not competitive outside

Europe

Neutral production units in Europe are

running at full capacity

Vivergo is out leaving the market

fundamentally tight

Front month/cash markets remain very

strong with a strong backwardation to

ward off cheaper US imports

Higher volumes of ethanol are expected

as mandates in Germany remain strong.

High GHG saving product gets a higher

premium, supporting plants such as

ours in Belgium and Holland

Fall of diesel should help to drive

ethanol demand higher

Europe

Alco Energy Rotterdam:

550,000cbm

AlcoBioFuel Ghent:

250,000cbm

FUTURE FOR BIOETHANOL IN ASIA

• China appears to have a plan, but implementation seems to be the challenge

• Japan will stick to ETBE

• Korea will stick to having a plan that will start at some time in the future

• Philippines has to find a way to allow for imported molasses if domestic supplies run short as the high prices for domestic ethanol are counter productive and the only one that loses is the customer

• Australia is the biggest shame because they have the ability to produce, but weak state governments cannot seem to act decisively

• Indonesia will focus on biodiesel as a platform for renewables

• Malaysia the same

• Thailand will continue to lead Asia in focusing on cleaner energy supply

• India is catching up on bioethanol and will continue to drive forward