German biodiesel tax may affect margins, projects

13 July 2006 16:12  [Source: ICIS news]

LONDON (ICIS News)--A new German biodiesel tax to be implemented in August could have detrimental effects on future margins, delay projects and reduce investments in new plants, market sources said on Thursday.

At the end of June, the German government said a tax of €0.09/litre on pure biodiesel (B100) and a tax of €0.15/litre on biodiesel as an additive (B5) was necessary as it could not afford the significant tax losses which would occur as end-users swapped from using regular diesel to biodiesel in their vehicles.

Several market players have said they were keeping away from the spot market as they wait for the new legislation to come into action. This has lead to a €20-40/tonne drop in biodiesel prices from mid-June to €730-780/tonne this week, according to global chemical market intelligence service ICIS Pricing.

Although demand remained strong, long-term contracts covering the second half of this year have also had margins squeezed due to uncertainty over how the new taxes would affect end-user buying interest, sources said.

Several biodiesel producers said they were even having doubts about increasing capacity at their plants this year and into 2007, adding that the upcoming taxes would be likely to reduce future investment in plants.

However, for many it was too late to halt the construction or capacity enlargement of plants, so it was likely that planned new projects would go ahead regardless.

Germany is Europe’s leading biodiesel producer, where a national capacity of 3m tonnes of biodiesel is expected to be onstream by the end of 2006.

By: Nicolette Allen
+44 20 8652 3214

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