Frost & Sullivan forecast huge growth for biodiesel market

EU Directives will Fuel Growth of the European Biodiesel Market

29 October 2001

The imminent announcement by the European Commission of its proposals for

two new directives to ensure that biofuels make an important contribution

to the total automotive fuel consumption in the EU will give a huge boost

to the European Biodiesel industry.  The directives will make sweeping

changes to tax laws to enable EU member states to introduce tax breaks for

biofuels, and will stipulate that biofuels must make up a fixed percentage

of all automotive fuel sales across Europe.  This firm backing by the

Commission will ensure that the biodiesel market has excellent growth

prospects.



A new study of the European Biodiesel market by Frost & Sullivan forecasts

that these two new initiatives will help increase the biodiesel market from

the 2000 value of $504million to $2.4billion by 2007 giving a compound

annual growth rate of 25% over the forecast period.



Gordon McManus, Research Analyst with Frost & Sullivan explains: "Biodiesel

can cost over twice as much to produce as conventional diesel, so without

some form of tax exemption it simply cannot compete at the pumps.  Until

now these exemptions have only been available in some countries, leading to

huge geographical variations in the biodiesel market and a certain amount

of uncertainty for producers.  If adopted, this European wide legislation

will provide the market stability producers have hoped for.  The

politicians are laying the challenge firmly at the feet of the biodiesel

producers to meet the volumes of biodiesel needed, which will require a lot

of hard work in terms of raw material procurement, capacity expansion and

market development."



As part of the Kyoto Agreement, the European Union committed to reducing

its emissions of CO(subscript: 2) by 8%  between 2008 and 2012.  The life

cycle analysis (LCA) approach to the overall atmospheric CO(subscript: 2 )

contribution of a fuel suggests that biodiesel uses about 50% less CO

(subscript: 2) than mineral diesel.  This has provided one of the main

incentives in persuading individual governments, and now the European

Commission, to support the development of the biodiesel market as an

important contribution to meeting their overall emission targets.



However, one of the key restraints in this market will be the availability

of raw materials.  Limits on the production of non-food oilseeds, and a

decrease in support payments for oilseed producers means there is less

incentive for farmers to grow rapeseed ? the main source of oil for the

biodiesel industry.  But, whether the price of rapeseed rises high enough

to significantly affect the biodiesel market, or whether demand for

rapeseed from the biodiesel industry outstrips the possible supply,

restraints on the available amount of raw materials is likely to be a major

restraining force as the biodiesel market grows.



Perhaps other sources of oil will need to be explored more fully in the

future such as the use of animal tallow or even McDonalds spent chip oil.

Modern technologies allow the use of mixed feedstocks, meaning that the

most suitable oils in terms of availability, price and quality at any

particular time can be used.



This is the first report produced on the European biodiesel market.  It

describes a market that is currently dominated by 3 key suppliers: Diester

Industrie, Novaol and Oelmühle Leer Connemann who have built their position

on experience and production capacity.  With such large growth projected

for this market, we can expect to see several new companies entering the

market with large capacity plants in the next few years, whilst existing

suppliers will invest in significant capacity expansion.



For unlimited access to constantly updated chemicals market news written

exclusively by Frost & Sullivans' team of industry experts visit

www.chemicals.frost.com.


Background
Frost & Sullivan is an international marketing consulting company that
monitors a comprehensive spectrum of chemicals markets for trends, market
measurements and strategies. This ongoing research is utilised to
complement a series of research publications to support industry
participants with customised consulting needs.

Sales Contact
The European Biodiesel Market (report code 3959-39) published October 2001
is available to purchase from: Frost & Sullivan, 4100 Chancellor Court,
Oxford Business Park, Oxford, OX4 2GX, UK.  Sales Contact: Bill Stringer
+44 (0) 1865 398651,bill.stringer@fs-europe.com

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