January 2, 2019 / 8:24 PM / 21 days ago

UPDATE 1-Pacific Ethanol plans to idle western section of Nebraska plant -sources

(Adds CEO comments, company and industry background, stock price, changes dateline to PHILADELPHIA/CHICAGO from NEW YORK)

By Jarrett Renshaw and Michael Hirtzer

PHILADELPHIA/CHICAGO, Jan 2 (Reuters) - Pacific Ethanol Inc plans to idle the western portion of its ethanol plant in Aurora, Nebraska, over the next two weeks amid historically weak margins that have forced the industry to throttle back production, according to three sources familiar with the plant’s operations.

The 110 million-gallon-a-year western section could remain shut until the summer, the sources said on Wednesday. The company, the nation’s sixth-largest ethanol producer, shut the smaller, eastern section of the plant late last month and laid off more than two dozen workers.

The sources requested anonymity because they are not authorized to speak about the company’s operations.

The company has already idled roughly 20 percent of its production capacity.

“We are continuously evaluating run rates. Aurora West is running,” Pacific Ethanol Chief Executive Officer Neil Koehler said in an email on Wednesday, declining to say whether the company was planning to idle the plant.

Pacific shares fell to a lifetime low of 76 cents on Monday, before recovering to $1.09 on Wednesday afternoon.

U.S. ethanol prices have rebounded as some producers cut back on production. Front-month Chicago Board of Trade ethanol futures on Wednesday settled up 0.3 percent at $1.27 per gallon after hitting a more than decade low of $1.20 per gallon in November.

Ethanol plants generally ramp up output in December and January, when the corn crop has been harvested and facilities run more efficiently in cooler weather. But output has slowed this year due to plants idling.

The U.S. Energy Information Administration pegged U.S. ethanol output last week at an average of 1.042 million barrels per day, down 4,000 bpd from the previous week and compared with 1.09 million bpd in the same week in 2017.

Ethanol makers in the United States have been hit by collapsing biofuel prices and higher costs for the corn and natural gas used to produce it, making production unprofitable for many. A loss of ethanol exports to China as a result of President Donald Trump’s trade war with Beijing also contributed to an ethanol oversupply. China was formerly a top outlet for U.S. biofuel.

Ethanol maker Green Plains Inc has also said it was laying off workers, turning off plants and even selling some facilities.

Reporting by Jarrett Renshaw in Philadelphia and Michael Hirtzer in Chicago Editing by Grant McCool and Matthew Lewis

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