The use of molasses instead of sugar cane as feedstock for ethanol production could offer hope to ethanol producers in the Philippines as they struggle to cut production costs in a bid to compete with lower-priced imports, producers and trading sources said this week.
The lower cost of production from using molasses would render indigenous fuel-grade ethanol more attractive to Philippines' oil companies, which have in the past gone in for imported material as it was cheaper.
"If this happens [producers in the Philippines are able to make cheaper fuel-grade ethanol], oil companies would rather use locally produced ethanol instead of imported material," a Singapore-based trader said.
Though molasses, a by-product that results from the processing of sugar cane into sugar, costs more than sugar cane, molasses have a higher ethanol recovery yield that makes its use as a feedstock more economical, a Filipino producer said.
A mt of molasses yields 300 liters of ethanol, while an mt of sugar cane yields only 72 liters of the product. So with molasses at around Pesos 3,500-4,000/mt ($81-92/mt) compared with Pesos 1,700/mt for sugar cane, this translates into a production cost of around Pesos 12-13/liter for ethanol using molasses, much lower than using sugar cane at Pesos 24/liter.
Also, the price of molasses has fallen from a high of Pesos 9,000/mt earlier this year.
Another ethanol producer said that one more advantage of using ethanol was that while "both sugar cane and molasses are seasonal in supply, you can stock molasses, which makes it more attractive [as a feedstock]."
Ethanol producers in the Philippines have in the past typically used sugar cane as feedstock and struggled with costs when cane prices rocketed. And poor economies of scale have also proved disadvantageous to local producers.
To date, Leyte Agri Corp. and Roxol Bioenergy use molasses as feedstock in producing potable ethanol and hence are the only two producers with capacity to use the cheaper feedstock.
And last month, Platts reported that San Carlos Bioenergy, which delayed the commercial startup of its 30 million liters/year ethanol plant from September to October, was retrofitting its distilling columns to allow it to use molasses as feedstock.
The Philippines' Biofuels Act of 2006 was meant to support local production of fuel-grade ethanol and decrease the nation's reliance on imported sources of energy. However, when sugar prices spiked in 2010 many ethanol producers swung to produce the more lucrative hydrous-grade ethanol, instead of fuel-grade, resulting in a shortage which forced the country to import all its requirements from outside.
Philippines' ethanol producers estimate that they will be able to cover 16% of the country's demand -- projected at 460 million liters/year -- once full implementation of the E10 mandate takes place in February 2012.
