Ethanol makers seek more state help

Ethanol manufacturers say they are still struggling to export surplus supplies, even after lobbying successfully last year to change the law to allow exports.

"The government should enforce measures to make it easier for ethanol manufacturers to export these surplus products," said Rungrote Sukkirtkijpibul, plant director of Sapthip Co.

Ethanol products used to be considered the same under the law as alcohol in beverages, and exports were banned to prevent tax avoidance. But Deputy Prime Minister Korbsak Sabhavasu helped amend the law so producers but not traders could export.

"We have been controlled by many laws, both industrial and commercial. During the early period the government supported us to open factories, but in reality [demand for ethanol] did not increase, and even though you want to export, you can't," Mr Rungrote said.

For example, to make exports commercially viable, ethanol producers need to pool their goods together in order to fill a container. "Considering each plant's surplus volume, if we do [export individually], it would be impossible to fill a whole container space and would result in higher costs. How can I compete with others?" said Mr Rungrote.

However, pooling is not flexible or practical, he added.

Currently, local demand for ethanol averages 1.2 million litres per day but the supply is 3 million litres.

Sapthip began operating its 1.5-billion-baht ethanol plant in Lop Buri at end of April 2009, using 500 tonnes of cassava a day. About 2.5 to three kilogrammes of cassava can produce one litre of ethanol.

The production cost is 21-22 baht per litre but the market price is only 23 baht so margins are thin.

Most ethanol producers use molasses but a sugarcane shortage last year prompted Sapthip to change strategy. "From May to August the price of molasses was very high, resulting in an undersupply of molasses and ethanol. Therefore, cassava needed to be used, and that was how we benefited from the opportunity," said Supoj Srisathaporn, sales and marketing director.

The plant produced 30 million litres of ethanol in 2009 and expects production to reach 60 million in 2010.

"Since starting operation, we have suspended production [occasionally] in order to fix our machinery, resulting in only an average of 120,000 to 140,000 litres of ethanol produced per day or 4 million litres per month at most," said Mr Supoj.

"However, in the fourth quarter of 2009 we were able to produce more than 200,000 litres a day."

The plant has a full production capacity of 230,000 litres per day.

Mr Supoj said the company had already secured some one-year purchase contracts, which helps it plan raw material sourcing and plant management to support sales plans.

Sapthip's customers include PTT, Shell, Esso, Chevron and IRPC, with almost half of its output sold to PTT.

The plant uses biogas to generate steam to heat boiling starch and for refining. Mr Rungrote said the company might consider setting up an electricity plant if production capacity increased.

In the short to medium term, he said, the government needed to do more to promote the use of gasohol in order to absorb local ethanol supplies.

"Currently I think we are not able to push forward with gasohol, since there is still petrol being sold here. If it was all gasohol, the demand for ethanol might reach 3 million litres per day," he said.

Mr Rungrote said ethanol exports had potential in the Philippines and Korea, and especially in Japan where E3 - 3% ethanol in petrol - is mandatory. "Japan does not have its own ethanol production and buys ethanol from Brazil, which has high transport costs. That makes it possible for our country to push forward our exports," he said.

source: bangkokpost