Bloomberg 7/9/2009
Europe’s biodiesel makers can expect profit margins to widen as tariffs cut U.S. imports and colder weather increases demand.
The chart of the day (see below) shows the premium of biodiesel to the price of rapeseed oil, a raw material, has broadened since the European Union moved to limit shipments from the U.S. in March. The EU set a non-binding target for 5.75 percent of energy for road and rail transport to come from biofuels by 2010.
“With mandates pushing up demand for 2010, European biodiesel producers could be coming out of the wilderness,” said Kevin McGeeney, a broker at Starsupply Renewables SA in Switzerland, who expects the margin to widen further as demand for fuel increases this winter.
The margin on rapeseed for biodiesel producers reached almost 100 euros ($143 a ton) last week, according to data provided by Starsupply. The marginal cost of production of biodiesel derived from rapeseed is about 60 euros a ton. The spread narrowed to minus 25 euros in May. Rapeseed is Europe’s biggest crop used for biofuel production and produces diesel that clogs at a lower temperature than fuels from other sources, making it popular in winter.
The EU imposed duties of as much as 237 euros a ton in March to counter U.S. subsidies and price undercutting.
