REPORT: Biodiesel Projects Going Strong, Though Corn-Based Ethanol Build Out May Be Leveling Off.
Growth in planned projects and those currently under construction remains strong for both ethanol and biodiesel plants, although data from Soyatech's Biofuels Index, newly updated for Q2 2007, also shows signs that the corn-based ethanol build out may be leveling off.
Commenting on the build out, Jacob Golbitz, director of research for Soyatech and its parent company, HighQuest Partners, said that while the percent change "is too small and the time frame too short to identify this as a definitive trend, we understand from industry sources that it is more difficult to secure debt financing for new refineries due largely to increased equity requirements on the part of banks providing this funding. We suspect that an additional cause may be constraints on the amount of corn available as a feedstock to produce ethanol."
Soyatech's Biofuels Index, which tracks planned and actual build-out of biofuels production capacity, reports dramatic growth in planned capacity for ethanol plants over the past year, from 6.761 billion gallons per year (BGY) as of July 1, 2006, to 13.03 BGY as of July 1, 2007 - an increase of 93%. During this same period, growth in ethanol capacity under construction increased 199%, from 2.417 BGY to 7.226 BGY.
During Q2 2007, total online capacity for ethanol increased by 564 million gallons per year (MGY), or 10.7%, from 5.289 BGY to 5.853 BGY, the Index finds. Capacity in planning rose by approximately 6% during the quarter.
However, the Index also points to a slight leveling off in construction of ethanol plants during Q2 2007 - the first time since the Index began tracking these numbers. According to the Index, capacity under construction decreased slightly by 1.7%.
Total online capacity for biodiesel production increased sharply - 41% from Q1 to Q2 2007, from 890 MGY to 1.255 BGY.
"While it is easier to produce impressive growth when starting from a smaller base, a 41% growth rate nevertheless means that industry capacity for biodiesel nearly doubled over the last three months. That is certainly a significant development," said Golbitz.
Biodiesel capacity under construction for the same period grew by 19%, from 1.613 BGY to 1.927 BGY, and planned capacity rose even further by 24%, from 2.331 BGY to 2.898 BGY.
Golbitz noted that one factor contributing to the strong showing for biodiesel is optimism that the $1 per gallon federal subsidy for biodiesel will be extended with the passage of the 2007 Farm Bill later this year.
The Index summary also discusses issues surrounding feedstock availability, noting a movement away from reliance only on soybean oil and towards the use of alternative feedstocks in the capacity build-out of biodiesel plants.
According to the Index, only 39% of capacity currently under construction, and just 16% of planned capacity, indicates soybean oil as the sole feedstock. "Given the development of trends that we have observed over the last six months, we expect convergence in the price of all commodity fats and oils over the next 6 to 12 months that will leave little to no additional margin for biodiesel producers that use alternative sources," Golbitz noted.
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