GOVT URGED TO STABILISE ETHANOL COSTS

       Ethanol manufacturers are calling for the government to increase ethanol reserves to stabilise production costs, which have risen in line with sugar prices and thus affected oil retailers.
       "We've already proposed this solution to the government, but they don't seem very interested. They prefer we store ethanol ourselves instead of crops, but that requires an investment in tanks, which in turn risks evaporation and explosion," said Thai Ethanol Manufacturing Association chairman Sirivuthi Siamphakdee.
       He said it was easier to store molasses, the main raw material in ethanol production.
       Thailand's promotion of gasohol will not be successful unless the government solves fluctuations in the price of ethanol, Sirivuthi said. The Energy Ministry fixed the price at Bt20.21 a litre this month, but that will probably rise to Bt25 or Bt26 in the fourth quarter, due mainly to an increase in the price of molasses.
       Oil retailers who mix 10-per-cent ethanol into gasohol products complain the high prices are preventing them from lowering their retail oil rates when global crude drops.
       "Thailand's ethanol price changes too rapidly, because the government announces the reference price each month based on the average molasses price over the previous three months, which is not up to date with present conditions. Instead, it should set the price on a quarterly basis," he said.
       He said molassas was now going for US$140 (Bt4,700) per tonne, but the Office of the Cane and Sugar Cane Board has announced a price of $110.
       Molasses is expected to be more costly next year from reduced supply, and ethanol producers may not be able to handle the pressure of high costs and low selling price, he added.
       So far, 45 ethanol plants have won production licences, but only 18 have started operations, with combined daily production capacity of 2.775 million litres. By the end of next year, five more plants are expected to operate, which will boost the country's ethanol supply to 5.695 million litres a day.
       However, ethanol consumption is forecast to increase from 1.56 million litres a day now to 2.21 million litres next year, due to the government's promotion of alternative energy.
       The price of molasses will move in line with sugar, which is expected to rise in the next couple of years because of higher imports by India and Indonesia, which have suffered drought, said Chalush Chinthammit, assistant vice president for business development and production at the KSL Group.
       Next March and April, raw sugar could exceed 20 cents a pound, due to speculation by hedging funds, he said.
       Thanks to higher prices in the 2009-10 harvest season, about 72 million tonnes of sugar cane is expected, up from 66.46 million tonnes in the previous season. The primary price of sugar cane will be Bt950 a tonne, but future increases will push sugar cane to about Bt1.1 billion per tonne.

       "Oil retailers complain the high prices are preventing them from lowering their retail oil rates when global crude drops."