Last synthetic ethanol plant in US to close

The petrochemical giant LyondellBasell Industries will exit the synthetic ethanol business—one of its longest-standing operations—by the end of October.

The company is closing its ethanol plant in Tuscola, Illinois, where it makes the alcohol for industrial applications via the hydration of ethylene. It is the last synthetic ethanol plant in the US. The firm is also closing a plant in Newark, New Jersey, where it makes denatured ethanol.

About 100 employees in Tuscola and 5 in Newark will be affected.

LyondellBasell says that in recent years synthetic ethanol has struggled against the fermentation-based competition, much of which is used as fuel. “Long-range profitability is impacted due to an oversupply of fuel-grade ethanol and falling price premiums,” a LyondellBasell spokeswoman says.

According to the Nebraska Department of Environment and Energy, the price of fuel-grade ethanol averaged $0.62 per L in 2014 and had fallen to $0.23 per L by 2020.

Scott H. Irwin, a professor of agricultural and consumer economics at the University of Illinois Urbana-Champaign, says a number of factors are behind the decline.

“A surplus of corn around the world drove down corn prices, which drove down ethanol prices,” Irwin says. The industry also added capacity from 2014 through 2018. Finally, the pandemic lockdowns in 2020 depressed prices for ethanol and other fuels, although that effect has waned.

Another factor that may have affected LyondellBasell’s business, Irwin says, is that ethanol distillers, seeing a drop in fuel demand, have been seeking customers in the industrial markets. One distiller, Grain Processing, completed a $48 million expansion in Muscatine, Iowa, earlier this year. Its new distillery is geared to disinfectants, medicines, and cleaners.

Back in the 1950s, when LyondellBasell forebear National Distillers built the Tuscola and Newark plants, the situation was the opposite. Distillers had to contend with volatile prices for Cuban molasses, their most important feedstock, according to a C&EN article at the time. Companies like Standard Oil and Texas Eastman built synthetic ethanol plants, while fermentation-based producers like DuPont idled theirs. In 1952, synthetic ethanol composed 57% of the industrial ethanol market.