NEW YORK (Dow Jones)--An ethanol oversupply will continue through the year's end, even if Aventine Renewable Energy Inc. (AVRN) shutters its plants while it tries to reorganize under bankruptcy protection.
Aventine filed for protection under Chapter 11 late Tuesday, following nearly a dozen other ethanol producers to bankruptcy court. A lack of funding to restructure struggling ethanol companies will likely force Aventine to mothball its plants, and eventually sell them, according to industry analysts.
Shuttering Aventine's facilities would reduce current U.S. ethanol production by about 2%. However, the supply cut will be offset by the restart of plants that oil refiner Valero Energy Corp. (VLO) recently bought from bankrupt VeraSun Energy Corp. (VSUQE).
"Aventine closing would cause the price to bounce, but VeraSun's plants ramping up production will probably cancel it out," said Sander Cohan, an analyst at Energy Security Analysis Inc., a Wakefield, Mass.-based consultancy. Eventually, Cohan said, the start-up of the former VeraSun facilities will likely force less competitive producers out of business.
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