Biodiesel glut cometh, says analyst

A newly published report heralds tough times for biodiesel producers in the near future.

"With capacity growing at 115% per year, the world is expected to run into overcapacity during 2007, even though growth in biodiesel consumption is expected to peak in 2006–2007," said report author Ralf Gubler, who's also a Vice President at SRI Consulting, the publisher of the report.

Gubler warns that, in classic supply and demand theory, when total growth in capacity worldwide exceeds expected consumption growth rates, producers should expect "intensified competition, lower capacity utilization rates, squeezed profit margins, a war for raw materials, and, probably, the closure of small-scale producers and those in less strategically important regions."

"Hardly a day passes without the announcement of a new biodiesel production plant, and they are becoming larger and larger," notes Gubler.

The report analyzes historic production and consumption patterns and makes five-year forecasts looking forward.

It foretells a coming shift in global biodiesel production patterns. While Western Europe accounted for more than three-quarters of worldwide biodiesel production in 2005, its share is expected to diminish as production grows at much higher rates in all other regions, headed by Asia, which is expected to become the second-largest biodiesel producing region, right behind Western Europe, and then followed by North America.

In terms of consumption, the report finds 61% of the world biodiesel total in 2005 was accounted for by Germany, with significant markets for the fuel in 2005 in France, the United States, Italy and Brazil. All other countries combined accounted for only 11% of world consumption. By 2010, the United States is expected to become the largest single biodiesel market, gobbling up roughly 18% of world biodiesel consumption, with new and large single markets for biodiesel expected to emerge in China and India.

While a number of vendors on the vanguard of innovations to lower the cost of biodiesel would likely take exception, Gubler opines that "the success of biodiesel hinges on government support through subsidies and tax relief. Without such subsidies, biodiesel would not be competitive with fossil diesel."

In over 500 pages and 280 tables, the report details 15 years of historical and five years of projected supply/demand figures on a country-by-country level.

And that kind of data doesn't come cheap - the report is $15,000 USD.

You can review an abstract of it here. 

For more information:

www.sriconsulting.com