Daily Biofuels Summary for October 31: Fuel shortages break out in China as US, Brazil set ethanol production records
October 31, 2007
Top Story:
In China, fuel riots occurred because of shortages. The shortages are affecting Shanghai, the southeast coastal provinces, and are spreading to the interior. Diesel is fixed-priced at $2.42 in China, about one third of the price in European markets, and fuel companies are getting squeezed by soaring crude oil costs, leading to production cutbacks and allocations. Prices have not been raised for 17 months despite crude oil rices nearly doubling. Meanwhile, ethanol producers are also under pressure in China from high costs, and from a government shutdown of new ethanol production projects owing to the effect of ethanol demand on food prices.
Producer News:
VeraSun Energy Corp announced that, with the launch of its new Albion, NE plant, it had reached the halfway point of its goal of 1 billion gallons per year in ethanol production.
In Iowa, Poet added new details regarding its Emmitsburg, IA cellulosic ethanol plant, jointly funded with the US Department of Energy. The will produce 125 Mgy of which 25 Mgy will come from corn fiber and cobs. The plant, which will be operational in 2011, will pay between $30 and $60 per ton of cobs and fiber for the 850 tons per day required by the plant. The cob price equates to a price of $0.63 and $1.26 per bushel, compared to $3.60 per bushel for corn.
Aventine Renewable Energy reported net income of $3.0 million for the third quarter and cash flow from operations of $8.8 million. The company blamed the poor results on falling ethanol prices and increased feedstock costs. Aventine estimated that the economic impact of declining ethanol prices on quarter-end inventory was $10.6 million.
International News:
In India, the Additional Secretary, Ministry of Petroleum and Natural Gas projected that $90 oil would lead to a trade deficit of $26 billion.
In Brazil, ethanol production reached a record 384 million gallons in October, but unlike the US where increased production is resulting in a glut, Brazil is facing an ethanol shortage as soon as next April.
In Japan, Sojitz agreed to acquire a 33 percent stake in ETH Bioenergia for $80 million. ETH Bioenergia, a subsidiary of Oldebrecht, will produce 259 Mgy of ethanol.
In Italy, national biodiesel production is projected to fall 40 percent for 2007 compared to last year, to to 450,000 tons. Production was 750,000 tons in 2006. Producers blamed regulatory changes for the drop, but said that Italy would increase capacity by 750,000 tons through 2009.
In Malaysia, the government has approved 91 biodiesel projects to date but only four are in operation. The high price of crude palm oil is cited as the cause for the expected capacity boom that has not materialized.
In Sweden, OKQ8 cancelled plans to sell Neste Oil biodiesel from Finland, bowing to pressure from Greenpeace over destruction of Malaysian rainforest to create the palm oil which is Neste’s primary feedstock.
In Kenya, HG Consulting will invest spend $475 million in The Ngima Project at Homa Bay, which will produce 100,000 tons of sugar for the domestic market and 68 Mgy of sugar cane ethanol for export.
Research News:
U.S. ethanol production increased to to 434,000 barrels a day in August, up 3 percent for the month. Fuel ethanol prices fell to $1.75 per gallon at the Chicago Board of Trade. The price of ethanol has recovered 15 percent since reaching a low of $1.515 per gallon in late September.
Policy and Policymakers:
Iowa Senator Chuck Grassley called on President Bush to direct the Environmental Protection Agency to approve E15, E20, E30 blends. Grassley said that with E85 not gaining acceptance, the US had to find other ways to ensure a market for higher blends of ethanol.
The EU Agriculture Commissioner, Mariann Fischer-Boel, reaffirmed the EU target of 10% of fuel consumption from biofuels by 2020. “While we take well-reasoned arguments extremely seriously, we have not seen anything yet to deflect us from the goals [that biofuel will make up 10 per cent of transport fuel by 2020] signed up to earlier this year by EU leaders,†she said in comments published eupolitix.com.
Consumer and Fleet News:
In Tennessee, the Chatanooga City Council approved a contract with GSL Energy Solutions to convert city sludge and wood chips into biodiesel. The city has enough sludge to produce up to 4.9 Mgy of biodiesel.
Financial News:
The Biofuels Digest Indexâ„¢, a basket of public biofuel stocks, fell 1.05 percent yesterday to close at 104.14. Losers led gainers 3 to 2. Among diversified large-caps, Archer-Daniels-Midland (ADM) fell 0.79 percent to $35.38, while among the mid-cap pure-plays VeraSun Energy (VSE) fell 4.71 percent to $12.34 as the market felt the impact of a downgrade on VSE shares issued on Monday. Among the small caps, Texcom (TEXC.PK) was up 11.11 percent to $0.10 and Xethanol (XNL) rose 3.06 percent to $0.64, while Better Biodiesel continued in free fall this week with a drop of 25 percent to $0.90.
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