Local biodiesel industry under threat

Rising feedstock prices and a lack of government support are threatening to derail the Western Australian biofuels industry, with the state’s biggest biodiesel player suspending production at its two facilities.

Australian Renewable Fuels Ltd this week said it would place its 45 million-litres-a-year biodiesel plants in Picton and Adelaide on care and maintenance, effective immediately, while it conducts a strategic review of its options.

The company said the rising cost of tallow feedstock, up from less than $600 a tonne six months ago to more than $900/t, had made the production facilities uneconomic.

Competition for tallow from Chinese soap makers has led to a 15 per cent rise in the tallow price in the past 10 days.

ARF acting general manager Max Ger told WA Business News the company was committed to getting its plants up and running again, and would be lobbying both sides of government for industry support in the coming weeks.

“At the end of the day, my view is that we’re not taking this lying down,” he said.

Mr Ger said he had received widespread support from shareholders and customers, which include Wesfarmers Premier Coal, Caltex, and earthmoving company Piacentini & Son.

ARF is currently assessing its opportunities in the US market, having secured patents for its technology for the North American Free Trade Agreement zone, which covers the US, Mexico, and Canada.

ARF joins the growing number WA biodiesel companies to have turned their focus overseas, their woes compounded by the federal government’s changes to the fuel tax legislation in mid-2006.

AgriEnergy Ltd announced last week it would put on hold indefinitely its proposed ethanol plants in NSW and Victoria, due to rising grain prices. The company’s main focus is to complete and start up its Beatrice Project near Nebraska in the US, relocating a full team of people to the US from Australia and Europe to support the start-up.

The US, Malaysia and Singapore have proven attractive locations for biodiesel producers, lured by the offers of government incentives and tax breaks, as well as close proximity to feedstock supply and the mandated use of biodiesel blended diesel.

The downturn in the biodiesel industry doesn’t appear to have deterred WA’s emerging ethanol industry, with the two proposed ethanol bio-refineries slated for the Kwinana industrial precinct proceeding as planned.

Osborne Park-based Grainol Ltd is still on track to commence construction of its 190ML ethanol plant in the East Rockingham industrial area in the third quarter of 2008, and is also assessing the feasibility of a second 190ML plant in Picton.

Grainol managing director Colette Menegola said the company was currently negotiating feedstock supply contracts, and was looking to adopt a multi-leveled feedstock supply system to buy grain from both major accumulators as well as directly from farmers.

Ms Menegola was unfazed by the threat of rising grain prices, with reports of massive global grain plantings likely to see prices drop and plateau. And unlike the east coast, whose local grain market was decimated by the drought, WA has a sustainable feedstock market.

“Fortunately, WA has had an adequate supply of grain historically year in year out,” Ms Menegola told WA Business News.

New South Wales company, Primary Energy, is also proceeding with its plans for a 160ML-a-year ethanol plant in Kwinana, as well as two other plants in Queensland and NSW.

Primary Energy has entered into memorandums of understanding with BP to supply fuel retailer with ethanol from each of its three plants.