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Published on January 14, 2008

Ethanol-manufacturers are likely to suffer from price pressure with new production capacity causing oversupply in the market.

Nattapon Nattasomboon, deputy director-general of the Office of Industrial Economics, said that although the reference price was fixed at around Bt17 per litre, local producers were taking Bt14-Bt15 due to oversupply.

Eight plants have started up, with total capacity of 1.26 million litres per day, nearly double the national daily demand of 613,000 litres.

Pornwilai International Group and Thai Nguan Ethanol have been forced out of the market since February and December respectively.

The Thai Ethanol Manufactur-ing Association (TEMA) says there will be another eight plants making ethanol this year, with com-bined capacity of 1.25 million litres a day.

TEMA chairman Sirivuthi Siampakdee said the manufacturers had no choice. "They need to run their plants as scheduled because they have already invested and need money to pay back their bank creditors," he said.

He said that if supply went up but demand remained steady, producers would face even tougher competition and greater losses.

He largely blamed the sudden change in the government policy to discontinue 95-octane petrol, which was supposed to take effect at the beginning of last year.

He called on the new government to reconsider this and announce a clear policy on the promotion of alternative fuel consumption and production.

Nattapon said the Energy Ministry should not fix the ethanol price by reference to Brazil, as oversupply here distorts the market.

He suggested letting market mechanisms determine demand as for the market price of biodiesel.

Meanwhile, he said, ethanolproducers should quickly improve productivity with government backing for advanced technology to produce ethanol from cellulose and biowaste, which would also balance agricultural supply and demand.

He advised caution on the suggestion by sugar-manufacturers and ethanol-producers to devote the sugar export quota to the making of ethanol, lest this affect global sugar prices.

"What the Industry Ministry should do right now is encourage cane-growers to increase crop yield in a bid to serve demand outside the country and release price pressure in the future," he said.

Chalida Ekvitthayavechnukul

The Nation