Singapore — The Philippines domestic bioethanol reference price dropped by 1.02% on month to Pesos 54.51/liter ($1,088.20/cu m) in October, data released Thursday by the Sugar Regulatory Administration showed.
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This was the second consecutive monthly drop in domestic ethanol price in Philippines. Before the recent slide in prices, the domestic bioethanol price increased for nine consecutive months.
However, the domestic ethanol reference price in October was up 14.72% year on year.
In the feedstock market, Negros molasses price rose 0.47% from September to Peso 8,057.8/mt in October, resulting in a higher equivalent feedstock cost of Peso 34.73/liter.
The increase in molasses price was contrary to market expectations. "Molasses prices should fall since crushing just started in September," a Philippine trader said.
The equivalent cost of another feedstock, sugarcane, was at Pesos 29.71/liter in October, down 4.13% from September. The equivalent price of sugarcane dropped due to the drop in sugar prices by the same magnitude to Pesos 1,605.78/lkg, which is equivalent to $610.8/mt.
Sugar prices eased following Philippines importing 300,000 mt of sugar in July and August for the first time in over two years. To tackle the high sugar prices, the SRA in October allowed additional 150,000 mt of sugar imports into the country by the year end.
Philippines has been grappling with high domestic ethanol feedstock costs since the Tax Reform for Acceleration and Inclusion or TRAIN bill introduced taxes on sweetened beverages from January 1 this year.
The bill imposed a Pesos 6/liter ($0.12/liter) tax on drinks containing calorific or non-calorific sweeteners and a Pesos 12/liter tax on drinks containing high-fructose corn syrup, or a combination of both.
In response, major beverage companies in the Philippines opted to switch HFCS with sugar in their production process, industry sources said.
In comparison, the average imported fuel ethanol price for October was $430.19/cu m CIF Philippines, S&P Global Platts data showed, which was less than half of locally produced ethanol prices even after including 1% import duty and 12% value added tax.
Oil companies in the Philippines are required to fulfill their local monthly allocations, or LMAs, before they can import cheaper fuel-grade ethanol.
The country's Department of Energy has set LMAs at 103,613 cu m for the fourth quarter of this year. This was 9.61% lower than 114,633 cu m for Q3, but a 50.71% spike compared with Q4 2017.
The Philippines' domestic bioethanol reference price is calculated by adding transportation costs to the average cost of the two major feedstocks for ethanol production -- molasses and sugarcane.
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