Pacific Ethanol Shuts Down Nebraska Plant, Fires 26 Workers
U.S. biofuel maker Pacific Ethanol has reportedly closed one of its two Nebraska plants and laid off 26 of its 60 workers in the state as the ethanol industry fights low prices and oversupply.
Pacific Ethanol Inc. (NASDAQ: PEIX) reportedly has shut down production of its 45-million-gallons-per-year Aurora East plant in Nebraska, according to a Reuters report citing unnamed sources. The company’s 110-million-gallon-per year Aurora West plant continues to operate. Pacific Ethanol has not responded to a request from Reuters to comment on the report.
About 20% of the company’s total capacity is currently offline as U.S. ethanol producers have been hammered by falling prices for their fuel and higher prices for corn feedstock and natural gas to operate refineries. A drop in exports to China resulting from the Trump trade war has left U.S. producers with too much supply and not enough demand.
In October, the president directed the U.S. Environmental Protection Agency (EPA) to remove its restriction on sales of motor fuel containing 15% ethanol (E15). Ethanol historically has been limited to 10% (E10) in U.S. motor fuel. The EPA is expected to have regulations in place by June of next year to allow sales of E15 during the summer months.
The president also lifted temporarily the EPA’s waiver program granting refiners exemptions from the ethanol blending requirements. The move helped raise ethanol prices from a 13-year low of around $1.12 a gallon to trade at around $1.25 early Wednesday afternoon. U.S. ethanol stockpiles of the fuel reached nearly 23 million barrels (about 966 million gallons).
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Corn growers in the Midwest and ethanol makers like Pacific have been pushing for adoption of E15 motor fuel, citing cleaner combustion of fuel with higher ethanol content. Emily Skor, CEO of Growth Energy, a biofuel trade association, said in October:
E15 is good for the engine, good for the environment and good for the pocketbook. It’s good for rural America. It’s a solution that doesn’t cost the taxpayer a cent. It’s exactly what farmers need right now.
But how good can it be if it leads ethanol producers to shut down production and fire workers?
Pacific Ethanol’s stock traded down 7.7% Wednesday afternoon, in a 52-week range of $1.12 to $4.75, and the low was posted earlier today. The 12-month consensus price target on the stock is $7.50.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.