Jamaica Ethanol shuts down plant, cuts 31 jobs

Jamaica Ethanol Processing has shut down its ethanol plant and terminated 31 jobs after 26 years in the business.

The move was completed last week after three consecutive years of rising input costs helped to sever margins and drive the company out of an ethanol market in which it started operating long before the other two operators in Jamaica — Jamaica Broilers Group (JBG) and Petrojam.

“The Caribbean Basin Initiative (CBI) ethanol business has been in distress for the last three years, initiated by the volatality of the commodities market and essentially an upside down trading set-up where the primary input — hydrous ethanol feedstock — cost is higher than the product that we sell,” Jamaica Ethanol Processing managing director Erwin Jones informed reporters yesterday.

Jamaica Ethanol had a production capacity of 50 million gallons per annum.

Jamaica Ethanol imported hydrous ethanol from Brazil and processed it into anhydrous ethanol. But prices of the raw material have surged to record levels due to numerous supply issues, including competition from the automobiles sector which uses hydrous ethanol in its flex-fuel vehicles; high sugar prices which have diverted lots of sugar cane processing to raw sugar; and bad weather.

“Prices have gone up substantially in Brazil,” noted Jones. “So what the Brazilian Government has done in the case of shortages there due to high demand, is to adjust back the blend ratio (ethanol-gasoline).”

What’s more is that due to the US financial constraints, Jones said the industry is bracing for a fallout in the CBI, which allows CBI members — including Jamaica — to supply up to seven per cent of US ethanol on a duty-free basis.

Source: Jamaica Observer