Diesel-shortage storm offering chances to biodiesel producers

Publish time: 17th December, 2010      Source: CCM
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      Guangzhou China Dec. 17, 2010 - Statistics in early November 2010, from China General Chamber of Commerce, shows that over 2,000 private-owned gas stations shut down due to serious shortage of diesel supply in most areas of southern China, and some developed provinces like Guangdong, Jiangsu and Zhejiang are the harder-hit areas. Until mid-November, the shortage situation is still haunting around these areas and tending to spread into other large cities, like Beijing, Shanghai, Chongqing, etc.






      The shortage of diesel may be a deadly tumor to most private gas stations, but it can also be a good chance to make a fortune for the diesel producers, especially the bio-diesel producers.
      Zhejiang Eastriver Energy S&T Co. Ltd. (Zhejiang Eastriver), a bio-diesel producer in Zhejiang Province, disclosed that the average daily supply of bio-diesel of the company had risen up to 120-200 tonnes from 70-80 tonnes lately after the outbreak of diesel shortage. They believed that the shortage pressure of diesel could be eased to some degree by the bio-diesel, and the mixed diesel, with a bio-diesel addition-ratio of 20% in the conventional 0# diesel, could almost equal the original one without readapting to the engine structure. Besides Zhejiang Eastriver, many other domestic producers of bio-diesel also expressed that they are badly in need of bio-diesel under the shortage circumstances lately.






      Before the shortage of diesel, the domestic bio-diesel industry has been developing hard with serious overcapacity. One reason is that the bio-diesel is not allowed to be sold like other conventional oils in the state-owned gas stations accounting for over half of the total domestic gas stations, which is the main obstacle preventing bio-diesel accessing to the market. Moreover, the fundamental reason lies in the price competitiveness of conventional diesel over bio-diesel, which is caused by high production cost of bio-diesel. At present, most domestic bio-diesel producers use the drainage oil as raw material, and the price of which has increased twice compared with three years ago, leaving slim or even negative profit margin for the bio-diesel producers if they sell at the same price as that of the conventional diesel. Therefore, seeking the “affordable” raw material is the top priority for the bio-diesel producers in China at the moment, which may be also the only way out for the whole industry.    






      Despite the current seemingly glorious prospects for bio-diesel, it can not help wondering: what is the outlet of bio-diesel again if the diesel shortage fades away in the near future?
      The B5 standard issued on September 26th this year allows the domestic bio-diesel to officially enter into the regular distribution channels next February, but, as mentioned above, how can the bio-diesel capture the market at the same time if its raw material price keeps so high? After the shortage storm, would the bio-diesel business have to meet challenges again?






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