By Michael Hirtzer and Isis Almeida
The second-biggest U.S. oil processor by capacity has now stopped operations at its corn biofuel facility in Riga, Michigan, said the people, who asked not to be identified because the information is private. A biorefinery in Bluffton, Indiana, is down for a “turnaround” and will resume production “as soon as favorable economic conditions exits,” the company said on its website.
U.S. ethanol producer Green Plains sold the two plants and another facility in Lakota, Iowa, to Valero for $300 million in October last year.
The closures highlight the challenges the American biofuels industry has been facing, with overproduction, the absence of Chinese buying due to U.S. President Donald Trump’s trade war with the Asian nation, and higher corn costs after a delayed harvest this year.
A representative for Valero didn’t return phone and email messages seeking comment.
Weak margins have prompted some plants to slow down production or cease operations altogether. Three Rivers Energy, an Ohio plant with capacity to produce 50 million gallons a year, said last month it had temporarily idled. REX American Resources Corp., which has interests in six U.S. ethanol plants, is running some facilities as few as 10 days a month.
Green Plains, which said its ethanol margins were negative in the third quarter, said it reduced output due to seasonal maintenance, while trader Andersons Inc. said it slowed production by 20% to 25% “at times when it didn’t make sense” because of high corn costs. Agricultural giant Archer-Daniels-Midland Co., which had already announced plans to spin off its dry ethanol mills, is in the initial stages of talks to form what could be a joint venture or sale.
The wave of shutdowns in the U.S. has helped bring the ethanol market back to balance, according to Pat Bowe, Andersons’s chief executive officer. Margins started to improve in late-September and have turned positive, Green Plains said on its investor call on Wednesday.
Valero’s Lakota facility, part of last year’s deal with Green Plains, is still accepting corn deliveries this week, according to the company’s website, a sign the facility is likely operating.