German biofuel target cut to hit market - producers

22 October 2008 14:53  [Source: ICIS news]

By Rachel Howat

 

LONDON (ICIS news)--The German government on Wednesday cut its proposed biofuel blend targets in fossil fuels for 2009 in a move that will put more downward pressure on tumbling biodiesel prices, said European producers.

 

The cabinet approved a cut in biofuel blending levels from 6.25% by energy content to 5.25% for 2009, the country’s Environment Ministry said.

 

From 2010 the biofuel blending level would be increased to 6.25% and remain fixed at that level until 2014.

 

“A lot of capacity has already been built taking into account the previous levels,” said one producer. “This will put further downward pressure on prices.”

 

A broker at Starsupply, a leading biofuel brokerage, said: “Although this vote is not great for the biodiesel industry, I think the outcome at this stage was anticipated by many and that showed in the lower demand in Germany recently as the volumes have dried up a bit."

 

Also included in the German vote was a decision to increase taxes on biodiesel to 18 euro cents a litre instead of the originally proposed 21 euro cents a litre from January 2009, the ministry added.

 

The legislation will go to a vote in the German parliament in December.

 

European biodiesel has tumbled from a high of $1,800-1,825/tonne FOB (free on board) NWE (northwest Europe) for rapeseed oil methyl ester (ROME) on 16 July to a current estimated value of $1,200/tonne, according to global chemical market intelligence service ICIS pricing.  

 

Market participants attributed this fall to slumping gasoil prices, which have fallen from $1,233-1,237/tonne on 16 July to $673.50/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp).

 

ROME is produced mainly in Germany and is in high demand in northern Europe in winter due its comparatively low cold filter plugging point. ROME is also the main constituent of fatty acid methyl ester (FAME).

 

The German vote followed last week’s decision by the Environment Committee of the European Parliament to cut proposed interim targets for biofuels in transport.

 

While retaining the goal of 20% by 2020, the new legislation will cut the 2015 target to 4%.

 

The European Parliament is expected to vote on these proposed amendments in December, although there is still disagreement among member states as to the exact form the legislation will take.

 

Several European countries in the past few months have revised planned biofuels targets due to fears it was contributing to rising food prices.

($1 = €0.76)

 

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By: Rachel Howat
+44 20 8652 3214

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