FocusEurope biodiesel rises on tax rumours

04 October 2007 12:27  [Source: ICIS news]

By Alex Martinos

 

LONDON (ICIS news)--European biodiesel prices rose sharply this week, significantly boosted by press speculation that Germany might reconsider planned tax increases on the fuel, market participants reported on Thursday.

 

Rapeseed methyl ester (RME) prices, already high due to rising rapeseed oil costs, have been pushed higher by the unconfirmed reports the federal government was reconsidering the decision to increase taxes on biodiesel to €0.15 cents/litre ($0.21 cents/litre) which had been planned for 1 January 2008.

 

“The Germans were meant to increase the taxes again in January but they’ve announced that they might not,” said one trader source. “That has fuelled the bullish run on winter grades.”

 

The rumours that the tax increase might not go ahead had “certainly pushed up prices”, another trader said.

                        

Prices for key winter-grade product RME have risen steeply and were assessed on Wednesday at $1,140-1,160/tonne FOB (free on board) NWE (northwest Europe), according to global chemical market intelligence service ICIS pricing.

 

If it occurred, the change in policy would increase demand for RME in the first quarter of 2008, one European producer said. Anticipating future price increases, sellers were less keen to make product available now, the source added.

 

The imposition of taxes on biodiesel by the German government had been met with concerted opposition from producers, who argued the policy was damaging the economic viability of the industry.

 

The federal government was also considering increasing the blending quota for biodiesel from 5% to 7% sometime in 2008, a European buyer said.

 

 “A suspension of the tax increase and an increase of the blending quota from 2008 onwards would be an important step, ecologically and economically, to give back the air to breathe to the young biodiesel sector in Germany,” said Klaus Henschel, CEO of German producer Biopetrol Industries, on Tuesday.

 

However, it still remained unclear what action German authorities would take.

 

“The government are mulling these issues and even they don’t know what to do at the moment,” the buyer source said.

 

Other German biodiesel producers include ecoMotion, Petrotec and Verbio.

 

($1 = €0.71)

By: Alex Martinos
+44 208 652 3214

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