Price hikes hit biofuels

HIT by the high cost of feedstocks, biofuel players Mission Biofuels Ltd and Australian Renewable Fuels Ltd are seeking to adapt their strategies as rising agricultural product prices disrupt their business models.

Mission said this week the current high feedstock prices made it unviable to produce biodiesel, but its wind power business was performing well and it had plans to add more windmills in the future.

The company also recently moved into making pharmaceutical-grade purified glycerine.

Earlier this week, North Perth-based Australian Renewable Fuels Ltd announced it would go to investors for about $3 million to repay debt and provide working capital as it seeks to sell assets and consolidate its operations to the mothballed Picton plant, from which it hopes to produce fuel for a major mining player.

The troubles in the biofuel sector come amid criticism that it is competing with food supplies.

In a statement, Mission Biofuels said it would only produce biodiesel if it could do so profitably.

"This will only be possible if we can secure sufficient quantities of feedstock at reasonable prices or if we are able to achieve higher prices with our off-take partners in both the US and Europe," it said.

"The company has been investigating several opportunities to secure moderate quantities of feedstock at reasonable prices which will allow us to produce and sell biodiesel on a jobbing basis." Mission said crude palm oil remained the cheapest vegetable oil as the cost of rapeseed oil and soy oil have increased sharply.

ARF's feedstock problems have revolved around tallow costs, which have been hit by the eastern states drought and rising demand from international soap producers.

ARF is planning to sell its South Australian plant but want to retain Picton because it remains confident of a 5 million to 7.5 million litres a year contract from a mining company which will be linked to feedstock prices.

ARF needs to obtain $1.5 million before the end of the financial year to construct a blending facility on the proposed customer's minesite.