Itochu struggles to find market

July 31, 2012 | 09:07

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Itochu Corporation’s investment in Vietnam-based ethanol facility is proving a headache.

Kohei Wantanabe, executive advisory officer of corporate administration of the Japanese group, said the delay in promulgating a legal framework for sale of bio-fuels in Vietnam was a barrier for Itochu and PetroVietnam Oil to sell their joint venture’s product in the domestic market.

“We completed the project and put it into commercial operation several months ago. But we don’t have a market for this product,” said Wantanabe.

Itochu two years ago joined hands with PetroVietnam Oil, a subsidiary of PetroVietnam, to build the $80 million Orient Bio-fuel facility in southern Binh Phuoc province. The facility started commercial operation from spring 2012 using cassava, a well-grown crop in the region as feedstock, aiming production of around 100,000 kilolitres per year. The ethanol produced by Orient Bio-Fuels is expected to be sold through gas stations under PetroVietnam Oil.

When deciding to invest into the project, Itochu saw a huge potential market as the Ministry of Industry and Trade (MoIT) was drafting a legal framework allowing sale of gasoline mixed with ethanol in Vietnam.

However, things did not go in accordance with the plan. The MoIT has yet to introduce such important legal documents and no timeline has been offered.

“We are discussing with our partner to find the best way to minimise losses,” Watanabe said.
Itochu is not the only victim of this delay. Other ethanol production plants in Vietnam - two operating in central Quang Nam and Quang Ngai provinces and one in northern Phu Tho under construction, are facing similar difficulties.