Governments' Strong Support to the Biofuels Sector Creating Significant Domestic Markets across the APAC Region

Business Wire, Nov 1, 2007

SINGAPORE -- Governments throughout the Asia Pacific region have made significant progress in introducing legislative or fiscal measures to support the biodiesel industry and boost demand. These measures are creating an increasingly viable domestic market within the region.

New analysis from Frost & Sullivan (http://www.chemicals&materials.frost.com), Strategic Analysis of the Asia Pacific Biodiesel Industry, finds that consumption that was virtually negligible across the region in 2004 is likely to reach 1.2 million tonnes in 2007, with China, Australia, Indonesia and the Philippines being the largest markets. Going forward, government mandates and other policies are likely to drive demand to around 8 million tonnes by 2013.

Initially, the biodiesel sector in Asia Pacific focused on export opportunities, especially to the European Union. Now, domestic demand is emerging as an important driver for the industry with many governments in the region setting formal targets for biofuels usage, imposing mandates on oil companies to blend biofuels, providing taxation benefits to biofuels, or introducing other measures to stimulate the industry.

"The Governments of New Zealand, the Philippines and South Korea have introduced blending mandates, either for biofuels as a class or specifically for diesel, which will create a guaranteed market, although the blending percentages are generally low when compared to the EU market," notes Frost & Sullivan Director of Industrial Technologies, Mark Dougan.

Simultaneously, South Korea alongside Indonesia has reached agreements with oil companies to introduce blends. Where diesel fuel is taxed, as in Australia, Thailand, and South Korea, some tax benefits have been given to biodiesel. Governments have also encouraged biodiesel production by offering waivers from corporate taxes, grants, or other incentives.

However, the rapid increase in the costs of feedstocks, and particularly of palm oil, since Q3 2006 have provided a major challenge to the commercial viability of the industry, as this has not been accompanied by an increase in biodiesel selling prices. This was further compounded by the fall in mineral diesel prices since the middle of 2006, with signs of increases in the crude oil price only emerging recently.

"Nonetheless, the long-term fundamentals remain unchanged and the industry will continue to grow in the region, although some of the more optimistic forecasts may not be met," opines Dougan. "Asia Pacific biodiesel producers need to address the likelihood of continued pressure on feedstock costs and ensure that they can produce as cost-effectively as possible, while simultaneously exploring alternative lower-cost feedstock supplies."

Consequently, alternative feedstocks such as waste cooking oil and jatropha are being actively explored by producers in the region. As these are available at a lower cost than the main vegetable oils, they can improve commercial viability to the biodiesel sector. However, the potential volumes of these feedstocks that are likely to be available remain unclear at this stage.

At present, many Asia Pacific biodiesel producers are focused primarily on export markets and many of these companies have foreign partners who would be focusing on distribution in their respective markets. Some of them are entering into joint ventures with large transport companies, or companies with a high volume of diesel consumption for their captive fleets.

Strategic Analysis of the Asia Pacific Biodiesel Industry is part of the Chemicals & Materials Growth Partnership Service program which also includes research in the following markets: chemicals, lubricants, oleo chemicals, paints, materials and petrochemicals. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Interviews with the press are available.

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the Strategic Analysis of the Asia Pacific Biodiesel Industry, then send an e-mail to Donna Jeremiah, Corporate Communications, at djeremiah@frost.com, with your full name, company name, title, telephone number, fax number, and e-mail address. Upon receipt of the above information, an overview will be sent to you by e-mail.

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Strategic Analysis of the Asia Pacific Biodiesel Industry