CAMBODIA’S only biofuel production plant is set to reopen in October, at the start of this year’s cassava harvest, after closing due to high crop prices recorded earlier this year.
MH Bio-Energy Cambodia, located in Kandal province, opened in November 2008 with an initial investment of US$30 million.
The factory needed at least 10,000 tones of cassava a month to produce ethanol, a compound that can be blended with petrol to reduce carbon emissions.
But production costs for the company were squeezed at both ends earlier this year by high domestic cassava prices coupled with a low final selling price on European markets.
“We stopped production since April due to the high price of dry-chip cassava,” Kim Jung-ho, MH Bio-Energy Cambodia director of administration said yesterday.
“We will restart production in October when the annual seasonal harvest of cassava comes because the tapioca [processed cassava] price will be going down at that time.”
Kim said 1 tonne of dry-chip cassava currently costs $210, about 45 percent more than $145 per tonne recorded last December. Meanwhile, the price of the biofuel on the European market is still low, at about $500 per tonne.
“The price of ethanol goes hand-in-hand with the price of oil, so when oil prices go down, bio-ethanol goes down. There was no room for us to increase the price of ethanol in the EU market; that’s why we decided to stop production,” he said.
He said the South Korean-owned plant had been affected by the suspension; however, he declined to put a monetary cost on the halt.
“It’s affected our revenues and our customers, but we discussed this issue with them before we stopped production,” he said.
The company had been contracting farmers to grow the crop in order to combat high prices by increasing supply, Kim said. The firm hopes that prices will decrease as farmers harvest the crop.
But Som Yen, director of Malai Trading Co in Banteay Meanchey province, which purchases cassava and corn for Thai markets, said yesterday that farmers were still discouraged from growing cassava following low market demand during the 2008 season.
“At that time, a tonne of dry chip of cassava purchased from farmers was $24 per tonne.
“That cheap price deprived farmers of their investments. That’s why they still hesitate to grow this type of crop and instead they grow corn,” he said.
Last year, the plant exported 29,406 tonnes of ethanol to European markets.