Industry group says Indonesia could turn molasses surplus into 250,000 KL of bioethanol

By Pandu Setiabudi

Indonesia’s persistent molasses oversupply could be converted into as much as 250,000 kiloliters of bioethanol each year, providing a potential boost for future E10 fuel blending, according to the Indonesian Ethanol Producers Association (APSENDO).

Speaking at the Ecoverse 2025 event on Thursday, APSENDO Chairman Izmirta Rachman said Indonesia currently has an annual molasses surplus of around 1 million tons. With every four kilograms of molasses able to produce one liter of ethanol, he said the unutilized surplus represents a large, untapped feedstock opportunity.

Izmirta said national molasses output is projected to rise to 1.9 million tons in 2025, while domestic demand has remained flat at roughly 900,000 tons per year. Most of that demand comes from non-energy sectors: about 600,000 tons are used for industrial ethanol (primarily non-fuel), 200,000 tons for MSG production and 100,000 tons for yeast manufacturing. Meanwhile, exports have been declining.

“This means around one million tons are not being absorbed optimally. The surplus could become a burden for sugar mills, but it can also be a major opportunity for bioethanol,” he said.

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The imbalance is worsened by geography. Almost all molasses-consuming facilities are located in Java, while much of the growing surplus is produced in Sumatra, creating logistical and cost barriers. Izmirta said the government may need to encourage the establishment of bioethanol plants outside Java to absorb the excess supply.

He also noted that ethanol economics are improving. The Indonesia ethanol index price (HIP) has historically remained above MOPS gasoline benchmarks, limiting fuel-grade ethanol use. But with molasses prices—representing 70% of ethanol production costs—dropping from above IDR 3,000 per kilogram to around IDR 700 this year, he said ethanol could soon become cheaper than gasoline benchmarks.

Izmirta argued that price stabilization tools such as a domestic market obligation or a domestic price obligation for molasses feedstock could help sustain the economics needed for large-scale E10 blending.

He also reiterated APSENDO’s concern that fuel-grade ethanol remains classified as an excisable good, despite the fact that bioethanol destined for fuel blending is already denatured and cannot be consumed as food or beverage alcohol.

Editing by Alexander Ginting