22 October 2008 19:28 [Source: ICIS news]
By Ben Lefebvre
Trent Markell, a financial analyst at the Harris Group in ?xml:namespace>
“It’s more of a natural slowdown - there’s only so much appetite for biodiesel right now. Starting in 2009, a lot of banks expect the credit issue to ease up,” Markell said.
In September 2007, there were 80 biodiesel plants reported to be under construction, according to industry statistics.
However, by September 2008, that number sank 39 under construction. As far as the more mature players are concerned, the credit crunch is a relatively small, temporary issue compared with the fall in crude oil prices and the government’s perceived lack of a consistent alternative energy policy, sources said.
“I’ve noticed that with anyone larger than a startup, they’ve never mentioned credit. Their problems involve fuel and oil prices on the one hand and the government’s policy on green energy on the other,” said Rich Jordan, a
Crude oil prices have fallen by more than 50% in just four months, dropping from a high of $145/bbl (€110/bbl) in July to $71.45 on the NYMEX on Tuesday.
To stay competitive, biodiesel producers pushed soy methyl ester (SME) prices down. Global chemical market intelligence service ICIS pricing assessed SME prices at $3.10-3.30/gal on 16 October, down about 40% from $5.35-5.50/gal on 3 July.
Cole Gustafson, who teaches macroeconomics and agribusiness finance at North Dakota State University, said government alternative energy incentives are not in complete alignment with the interest of biofuel producers.
“By and large, there has been some impact on credit problems on Wall Street. But there are larger internal and external factors,” Gustafson said.
Although new standards call for 1bn gal/year of biodiesel by 2012, many companies do not think the government is laying the groundwork for a more biofuel-friendly infrastructure. And while the federal government approved a one-year extension of renewable fuel tax credits, the industry feels it needs to come up with a more long-term plan.
National Biodiesel Board spokeswoman Jenna Higgins said shrinking credit lines have made things tougher for the country’s 170 biodiesel producers but has not caused any causalities yet.
“Biodiesel producers are in the same boat as everyone else. We don’t know of any plants that have gone out of business, but they are hurting,” she said.
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