Biodiesel in crisis
2 Jun 2008
The fledgling UK biodiesel industry is being undermined by heavily subsidised US imports, which have caused the demise of one major operator - D1 Oils (see panel) - and threaten the future of many other producers.
London - The fledgling UK biodiesel industry is being undermined by heavily subsidised US imports, which have caused the demise of one major operator - D1 Oils (see panel) - and threaten the future of many other producers.
Market observers estimate the US subsidy as being worth around 25% of the product sales price. This, they say, is enabling US producers to supply the market at, or below, the cost price of their European competitors.
"It is difficult to get actual figures on the amount of fuel coming in, but my understanding is that the US imports are swamping this [the UK] market," said Claire Wenner, head of Transport Biofuels at the Renewable Energy Association. "Many companies will be affected by this, as there has been a lot of investment in biodiesel production in recent years."
At present, the only light at the end of the tunnel is that the European Biodiesel Board has presented a case to the European Commission, which could lead to the imposition of anti-dumping or countervailing duties against the US. Industry experts believe (and hope) such measures could be in place by the end of the year.
The biodiesel industry has been the focus of a recent spate of investments in new capacity in the UK and continental Europe through companies such as Ineos, BioFuels Corp and Greenergy. This has been driven by the Renewable Transport Fuel Obligation (RTFO), which has specified a minimum biofuel content of 2.5% in petrol and diesel sold on UK forecourts from April this year.
Among these leading players, Biofuels Corp operates a 250 kilotonne per annum (ktpa) biodiesel plant on Teesside and plans to start up two 200-ktpa plants alongside its existing facility later this year.
"We are currently producing biofuels at relatively low rates," said Biofuels Corp chairman Sean Sutcliffe, noting the difficulties of competing with US imports. Like many in the industry, he is hoping for action "sooner rather than later" from European regulators.
"The issue is that we need biofuel, alongside other things, to do its part in fighting climate change, but at the moment there is no basis for people to invest," said the company chairman. Biofuels Corp is, nevertheless, determined to stay in the market.
"We are under Barclays Venture ownership and have strong support from Barclays. So we will be there," Sutcliffe concluded.
Meanwhile, an exception to the general gloom is Argent Energy, which operates a 45-ktpa biodiesel plant near Motherwell, Scotland.
The company is in a different situation to most biodiesel producers in that it specialises in raw materials based on tallow and used cooking oil. "We have seen these effects [in the market] due to the US [subsidy] policy, but Argent is operating "at close to full capacity" in response to high demand," said an Argent spokeswoman.
D1 Oils goes back to its roots
D1 Oils plc has announced that it is shutting down its UK biofuels refining and trading operations, which are based at Middlesbrough and Bromborough, and will instead concentrate on the upstream breeding, development and planting of new varieties of commercial biofuel crops. The 273- employee company announced the move alongside losses of £46.1 million in a preliminary results statement for 2007.
Company executives blamed the closures on the impact of rising feedstock prices and imports of heavily subsidised US biodiesel.
"Refining food-grade vegetable oils into biodiesel in Europe has developed into a highly competitive market in which only very large-scale operations are viable," commented Elliott Mannis, chief executive officer of D1 Oils.
D1 Oils had planned to increase its biodiesel capacity at Middlesbrough from 32 ktpa to 100 ktpa in 2007, and to reach an overall capacity of 420 ktpa by the end of 2008. The company had also secured off-take contracts, including one to supply around 24kt of biodiesel over a 12-month period to UK fuels distributor Petroplus.
However, as market conditions deteriorated, D1 held capacity at Teesside at 42 ktpa and stalled plans to convert the Bromborough site, acquired in January 2007, to create 100 ktpa of biodiesel capacity.
Market observers estimate the US subsidy as being worth around 25% of the product sales price. This, they say, is enabling US producers to supply the market at, or below, the cost price of their European competitors.
"It is difficult to get actual figures on the amount of fuel coming in, but my understanding is that the US imports are swamping this [the UK] market," said Claire Wenner, head of Transport Biofuels at the Renewable Energy Association. "Many companies will be affected by this, as there has been a lot of investment in biodiesel production in recent years."
At present, the only light at the end of the tunnel is that the European Biodiesel Board has presented a case to the European Commission, which could lead to the imposition of anti-dumping or countervailing duties against the US. Industry experts believe (and hope) such measures could be in place by the end of the year.
The biodiesel industry has been the focus of a recent spate of investments in new capacity in the UK and continental Europe through companies such as Ineos, BioFuels Corp and Greenergy. This has been driven by the Renewable Transport Fuel Obligation (RTFO), which has specified a minimum biofuel content of 2.5% in petrol and diesel sold on UK forecourts from April this year.
Among these leading players, Biofuels Corp operates a 250 kilotonne per annum (ktpa) biodiesel plant on Teesside and plans to start up two 200-ktpa plants alongside its existing facility later this year.
"We are currently producing biofuels at relatively low rates," said Biofuels Corp chairman Sean Sutcliffe, noting the difficulties of competing with US imports. Like many in the industry, he is hoping for action "sooner rather than later" from European regulators.
"The issue is that we need biofuel, alongside other things, to do its part in fighting climate change, but at the moment there is no basis for people to invest," said the company chairman. Biofuels Corp is, nevertheless, determined to stay in the market.
"We are under Barclays Venture ownership and have strong support from Barclays. So we will be there," Sutcliffe concluded.
Meanwhile, an exception to the general gloom is Argent Energy, which operates a 45-ktpa biodiesel plant near Motherwell, Scotland.
The company is in a different situation to most biodiesel producers in that it specialises in raw materials based on tallow and used cooking oil. "We have seen these effects [in the market] due to the US [subsidy] policy, but Argent is operating "at close to full capacity" in response to high demand," said an Argent spokeswoman.
D1 Oils goes back to its roots
D1 Oils plc has announced that it is shutting down its UK biofuels refining and trading operations, which are based at Middlesbrough and Bromborough, and will instead concentrate on the upstream breeding, development and planting of new varieties of commercial biofuel crops. The 273- employee company announced the move alongside losses of £46.1 million in a preliminary results statement for 2007.
Company executives blamed the closures on the impact of rising feedstock prices and imports of heavily subsidised US biodiesel.
"Refining food-grade vegetable oils into biodiesel in Europe has developed into a highly competitive market in which only very large-scale operations are viable," commented Elliott Mannis, chief executive officer of D1 Oils.
D1 Oils had planned to increase its biodiesel capacity at Middlesbrough from 32 ktpa to 100 ktpa in 2007, and to reach an overall capacity of 420 ktpa by the end of 2008. The company had also secured off-take contracts, including one to supply around 24kt of biodiesel over a 12-month period to UK fuels distributor Petroplus.
However, as market conditions deteriorated, D1 held capacity at Teesside at 42 ktpa and stalled plans to convert the Bromborough site, acquired in January 2007, to create 100 ktpa of biodiesel capacity.
