Ethanol producers on brink of bankruptcy
Ethanol producers on brink of bankruptcy
Only 20 percent of ethanol can be sold in the domestic market, while the other 80 percent is being exported to Japan, South Korea and the Philippines.
Producers reportedly have incurred losses of VND434 for every liter of ethanol made.
Ethanol (E5) first hit the market in 2007. Vietnam today can churn out 535 million liters of ethanol every year, enough to satisfy domestic demand.
The government encouraged the use of E5 as an environmentally friendly product. However, despite support, and the outstanding features of the product, E5 has not been popular in Vietnam.
A report of the Ministry of Industry and Trade showed that one ethanol plant is no longer operating, while the other six are running at moderate levels.
The plants have been trying to drag out their operations, hoping that E5 will become more popular in the future.
Dai Viet Company’s ethanol plant, which has designed capacity of 70 million liters per annum, is running at just 35 percent of capacity.
Dong Xanh JSC stopped its operation two years ago, but it still cannot pay the debt of VND967 billion it owes to banks, workers and growers of cassava, the plant from which ethanol is extracted.
Even the ethanol plants owned by PetroVietnam, a major player in the oil and gas sector, are in distress. The construction of the Phu Tho ethanol plant stopped in mid-2012 due to financial problems.
Prior to that, the Binh Phuoc ethanol plant, also a subsidiary of PetroVietnam, reportedly was taking a loss of VND270 billion a year.
Another plant of PetroVietnam’s – Dung Quat – churned out 27,000 cubic meters of ethanol alcohol last year, but only 10 percent could be sold domestically.
The low domestic demand, plus the high production costs, have caused huge losses to ethanol plants.
According to PetroVietnam, Vietnam needs 30,000-40,000 cubic meters of E5 petrol every year, or 1,500 cubic meters of ethanol alcohol. The figure is equal to a five-day output of one ethanol plant.
Thus, most ethanol output has been exported to Japan, South Korea and the Philippines, while only 20 percent is sold in the domestic market via PetroVietnam’s and Saigon Petro’s distribution networks.
While the average production cost is VND17,000-18,000 per liter of ethanol, Vietnamese ethanol plants can sell ethanol exports at only VND14,000 per liter.
At these prices, ethanol plants will incur a loss of VND300-600 billion if they produce 100 million liters a year.
As for domestic consumption, the plants take a loss of VND434 for each liter sold.
Sources said that continued losses were the reason why many producers wanted to stop investments. Japanese Itochu and Vietnamese Licogi 16 last year said they wanted to withdraw their capital from the Binh Phuoc ethanol plant. However, their stakes still cannot be transferred because they have not found buyers.
The biggest problem of the ethanol plants, according to analysts, is the high production cost, caused by the high investment rate and expensive raw materials.
The analysts cited several documents which noted that Vietnamese are able to harvest only 15-20 tons of cassava from each cultivated hectare, which is one-third of the amount in other countries.
vietnamnet
