News Release Details
Bio fuel bandwagon slows as feedstock prices surge
New Delhi 05-Oct-2007
The bio-fuels bandwagon may be running out of gas with soaring costs for feed stocks like wheat and palm oil prompting producers to shelve planned plants and cut output at existing facilities. "There are lots of plans (for new plants) now but whether these are going to materialise we simply don't know," Mr Robert Vierhout, Secretary-General of the European Bio-ethanol Fuel Association, told a conference this week. "In the present circumstances of very high raw material prices it is understandable if some producers say well it seems to me we need to wait a couple of years until things stabilise." Bio-fuels, mainly produced from agricultural crops such as maize, sugarcane and vegetable oils, are seen by many as a way to cut emissions of greenhouse gases and to boost energy security at a time when oil output may be at or near its peak. <b>Plans Delayed</b> Malaysia took the lead in the development of Asia's bio-diesel industry but is expected to produce less than 1-lakh tonnes of palm oil-based bio-fuel in 2008 as most producers delay plans due to rising feedstock prices. "Most of the plants which are now completing construction are not being commissioned as it is just not viable," said M.R. Chandran, an independent industry analyst and former head of the Malaysian Palm Oil Association. Palm oil prices are just five per cent off an historic high of 2,764 ringed ($727.3) a tonne reached in June. The European Union led by Germany has emerged as the key producing region for bio-diesel, while the US and Brazil are the top producers of petrol substitute ethanol. Major tax incentives fuelled Germany's expansion but these have been cut back in recent months, reducing demand and prompting many plants to operate well below capacity. "If we will not' have any change in our regulation in Germany it is very clear that within the next two years more or less 50 per cent of the capacity in Germany will vanish," Mr Karl Giersberg, Chief Financial Officer for EOF Biodiesel said this week. Massive government support has also driven the expansion of the bio-fuels sector in the US. <b>Excess Supply</b> "Supply has gotten out in front of demand and that's not surprising considering the enormous support that ethanol has had," said Mr Neil Harl, an Iowa State University professor and ethanol industry consultant "We've got a painful period and the most dramatic negative impact of all this is on new investment. Some projects have been dropped," he said. The fledgling US bio-diesel industry has also been hit by rising costs for its key feedstock, soybeans, with prices near record highs."They are in more difficult straits. It caught them more, in the infancy," Harl said. Top bio-fuels exporter Brazil has been expanding output of bio-ethanol despite tight margins with its production based on sugarcane, a commodity whose prices have been falling. Its emerging bio-diesel sector, which also relies on soya beans, has been under pressure. Brazil will impose a two per cent-bio-diesel mix in conventional fuel from January 2008. Even with current high oil prices, fossil diesel is cheaper than bio-diesel and current capacity far exceeds demand. <b>Production</b> More than 40 Bio-diesel plants are operating in Brazil, able to produce up to 2.18 billion liters per year, and other 42 projects are being evaluated by the National Petroleum Agency. This surpasses the demand following the implementation of the government programme, of 840 million liters per year. The mandatory mix is expected to be raised to 5 per cent in 2013. The bio-fuels sector has also faced growing public concerns on issues such as whether they really help to reduce greenhouse gas emissions and if they may have contributed to a sharp recent rise in food prices. Last month, the Organization for Economic Cooperation and Development (OECD) called on Governments to cut their subsidies for the sector, saying bio-fuels may "offer a cure that is worse than the disease they seek to heal." <b>2nd Genration Fuel</b> Many see the solution as so-called second generation bio-fuels which involve breaking down non-edible crops and even municipal waste by enzymes to create liquid motor fuel. They are not yet commercially viable but there is heavy investment in research into the area.
New Delhi 05-Oct-2007
The bio-fuels bandwagon may be running out of gas with soaring costs for feed stocks like wheat and palm oil prompting producers to shelve planned plants and cut output at existing facilities. "There are lots of plans (for new plants) now but whether these are going to materialise we simply don't know," Mr Robert Vierhout, Secretary-General of the European Bio-ethanol Fuel Association, told a conference this week. "In the present circumstances of very high raw material prices it is understandable if some producers say well it seems to me we need to wait a couple of years until things stabilise." Bio-fuels, mainly produced from agricultural crops such as maize, sugarcane and vegetable oils, are seen by many as a way to cut emissions of greenhouse gases and to boost energy security at a time when oil output may be at or near its peak. <b>Plans Delayed</b> Malaysia took the lead in the development of Asia's bio-diesel industry but is expected to produce less than 1-lakh tonnes of palm oil-based bio-fuel in 2008 as most producers delay plans due to rising feedstock prices. "Most of the plants which are now completing construction are not being commissioned as it is just not viable," said M.R. Chandran, an independent industry analyst and former head of the Malaysian Palm Oil Association. Palm oil prices are just five per cent off an historic high of 2,764 ringed ($727.3) a tonne reached in June. The European Union led by Germany has emerged as the key producing region for bio-diesel, while the US and Brazil are the top producers of petrol substitute ethanol. Major tax incentives fuelled Germany's expansion but these have been cut back in recent months, reducing demand and prompting many plants to operate well below capacity. "If we will not' have any change in our regulation in Germany it is very clear that within the next two years more or less 50 per cent of the capacity in Germany will vanish," Mr Karl Giersberg, Chief Financial Officer for EOF Biodiesel said this week. Massive government support has also driven the expansion of the bio-fuels sector in the US. <b>Excess Supply</b> "Supply has gotten out in front of demand and that's not surprising considering the enormous support that ethanol has had," said Mr Neil Harl, an Iowa State University professor and ethanol industry consultant "We've got a painful period and the most dramatic negative impact of all this is on new investment. Some projects have been dropped," he said. The fledgling US bio-diesel industry has also been hit by rising costs for its key feedstock, soybeans, with prices near record highs."They are in more difficult straits. It caught them more, in the infancy," Harl said. Top bio-fuels exporter Brazil has been expanding output of bio-ethanol despite tight margins with its production based on sugarcane, a commodity whose prices have been falling. Its emerging bio-diesel sector, which also relies on soya beans, has been under pressure. Brazil will impose a two per cent-bio-diesel mix in conventional fuel from January 2008. Even with current high oil prices, fossil diesel is cheaper than bio-diesel and current capacity far exceeds demand. <b>Production</b> More than 40 Bio-diesel plants are operating in Brazil, able to produce up to 2.18 billion liters per year, and other 42 projects are being evaluated by the National Petroleum Agency. This surpasses the demand following the implementation of the government programme, of 840 million liters per year. The mandatory mix is expected to be raised to 5 per cent in 2013. The bio-fuels sector has also faced growing public concerns on issues such as whether they really help to reduce greenhouse gas emissions and if they may have contributed to a sharp recent rise in food prices. Last month, the Organization for Economic Cooperation and Development (OECD) called on Governments to cut their subsidies for the sector, saying bio-fuels may "offer a cure that is worse than the disease they seek to heal." <b>2nd Genration Fuel</b> Many see the solution as so-called second generation bio-fuels which involve breaking down non-edible crops and even municipal waste by enzymes to create liquid motor fuel. They are not yet commercially viable but there is heavy investment in research into the area.