Europe's biofuels producers are poised for a wave of consolidation and bankruptcy, even as plans are continuing to ramp up output even further, US officials have warned.
A spate of failures of biodiesel plants, from Austria to the UK will accelerate this year, as rising imports and a "comparatively low" crude oil prices and strong imports dent margins, as well as the high prices of the vegetable oils from which it is made.
The profits squeeze has forced many surviving refineries to cut back production, with plants running at an average of 46% of capacity last year, down from 70% in 2007.
"Under the current market conditions, it is questionable that the EU biodiesel market can support all existing - let alone projected - production capacity," a report from US Department of Agriculture staff in the Hague said.
"Consequently, one can expect to see a number of plants closing their operation or even having to file for bankruptcy in the coming years."
'Consolidation inevitable'
And the trend is set to spread into the bioethanol industry, which makes biofuels from grains, and faces the "same problems… [of] oversupply due to elevated domestic production, slackening demand and competitive imports".
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EU's top bioethanol producers, 2011 (change on 2010)
1: France, 950m litres (unchanged)
2: Germany, 860m litres (+4.9%)
3: Benelux, 820m litres (+61%)
4: UK, 700m litres (+150%)
Total: 5.38bn litres (+21%)
Source: USDA attache report |
A slump in ethanol prices this year has already prompted many producers to enter alternative markets, such as the drinks, chemicals and pharmaceuticals sectors.
"Consolidation of the sector, with closure of smaller plants and investments in larger size plants, seems inevitable," the briefing said.
Plant plans
The warning comes amid a continuing wave of expansion in the bioethanol production, which rose by 30% last year, compared with a 9% increase in biodiesel output.
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EU's top biodiesel producers, 2011 (change on 2010)
1: France, 2.61bn litres (unchanged)
2: Germany, 2.50bn litres (-27%)
3: Benelux, 2.65bn litres (+32%)
4: Spain, 1.08bn litres (+10.2%)
Total: 11.59bn litres (-0.9%)
Source: USDA attache report |
Besides the wheat ethanol plant backed by Associated British Foods and BP set to open in the north of England this year, with capacity to produce some 400m litres of the biofuel a year, a 570m-litre plant is due to open at the Netherlands port of Rotterdam.
A 200m-litre corn ethanol plant is due to open in Hungary by the end of next year.
However, consumption of biofuels has fallen short of EU hopes, representing only 3.5% of road fuel use compared with a target of 5.0%.
The biofuels market has since the summer of 2008 "deteriorated substantially because of low crude oil prices, high vegetable oil prices, increasing biodiesel imports, and the financial crisis", the briefing said.
Indeed, the relatively low price of petrol has prompted drivers of duel-fuel cars in Sweden, one of Europe's most environmentally aware countries, to "abandon" ethanol.
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