At the beginning of July 2011 it was announced that ‘Jamaica Ethanol Processing has shut down its ethanol plant’ following ‘three consecutive years of rising input costs’ that severely affected profit margins – input costs were greater than the sale price of the processed product. The plant had an installed capacity of 50 million gallons per annum, and was based on importing hydrous ethanol from Brazil and exporting processed anhydrous ethanol to the USA. The aim was to take advantage of price differentials between ethanol exported directly to the US from Brazil and exports passing through a Caribbean processing facility. In addition to the cost squeeze, according to press reports, the trading arrangement with the US was also running into difficulties as a result of changes to domestic US ethanol policies.
The Petrojam ethanol facility, established in 2005, also shut down temporarily in June 2011 as a result of a shortage of supply of hydrous ethanol.
In the wider sugar sector in Jamaica, the transfer of three sugar estates to China’s Complant International Sugar Company has now been completed. A 49-year lease has been taken out on roughly 18,000 ha of cane fields, with commitments made to invest in mill renovation.
This comes against the background of increased government investment in sugar cane production. In August 2011 the allocation of an additional US$11.7 million to the Cane Expansion Fund was announced. This fund, administered by the Sugar Industry Authority (SIA) is used to finance improvements in infrastructure on sugar cane farms, including irrigation and drainage. The government is also to implement the recommendations of the Sugar Industry Commission on ‘reshaping the institutional, regulatory and marketing arrangements within the industry’. According to Agriculture Minister Robert Montaque, ‘individual manufacturers can market their own sugar, under license from the SIA, providing they subscribe to the uniform cane payment system.’
The development of a multi-product based sugar cane sector is critical plank of Jamaica’s sugar sector transformation strategy, and the closure of ethanol processing facilities in Jamaica may well signal the closing down of one option for revenue enhancement in the sugar cane sector. A feasibility study on the establishment of a sugar refinery in Jamaica is expected shortly. It remains to be seen whether the recent experience in ethanol processing will impact on the willingness of investors to participate in the proposed sugar refinery.
Efforts to expand sugar cane production, which appear to be yielding some results, may however prove a greater determining factor in investors’ decisions than the fate of an export-oriented, import-dependent ethanol processing facility.