New research from Frost & Sullivan reveals that and ‘expected to triple over the next six years. Europe’s desire to be less dependent on oil imports has revived interest in alternative fuels. This need to be self-sufficient has led to the enactment of laws by the individual Member States’ governments that are encouraging and pushing the biodiesel market.
A new analysis conducted by Frost & Sullivan, the European market Analysis of biodiesel and raw materials in 2007, reveals that the market earned revenues of 2.93 billion Euros in 2006.
According to forecasts, this figure is expected to reach 9, 75 billion euros in 2013. “the biodiesel market has benefited from the support of the European Commission through the Kyoto Protocol and the Directives 2003/30 / EC and 2003/96 / EC, seeking to promote specifically biofuels and to set indicative targets for their use in the transport sector, “explains the analyst of Frost & Sullivan Robert Outram.
It is expected that these regulations will lead to increased use of biofuels and make them competitive in terms of cost compared to other mineral fuels. Encouraged by the EU legislation, individual member states have also approved a number of incentives such as tax relief, RTFO (Renewable Transport Fuel Obligation, which requires suppliers a certain percentage of sales of biofuels) and blending mandates.
In general, blending mandates have particularly aided the biodiesel market and the fuel sector. This legislation requires, in fact, that oil companies to blend a set percentage of biofuel in all its fuels, which for them with a huge logistical challenge of view. “Oil companies will require large volumes of biofuel to meet the mandate levels, even though percentage levels are usually low – explains the analyst of Frost & Sullivan.
This means that oil companies are likely to team up with biofuel producers in long-term agreements or even invest in their facilities. ” Such helpful mandates should, however, contribute to an increase in raw material prices.
Since the production of vegetable oil in Western Europe has reached full capacity and has remained constant over the last decade (between 11 and 12 million tons), the biodiesel market, highly competitive, is under pressure in the search for materials first at competitive prices.
Also with the contribution of 1 million additional tons from the new EU member states, to meet the European Union Directives – the aim of which is to ensure that biodiesel represents 5.75% of all transport fuels – will require approximately 9.5 million tons of biodiesel.
“Assuming a conversion of 1: 1 vegetable oil to biodiesel in terms of volume, it would need 80% of all the vegetable oil currently produced in Europe for the biodiesel market,” said Outram.
The overwhelming demand for finished products inevitably affect the prices of biofuels until it reaches a level where the profit margins of manufacturers will begin to decline. Since costs of raw materials account for 70% of all operating costs of a plant, biodiesel producers will largely rely on effective recovery strategies of the first as well as of reduced logistics costs.