Sterling delays biofuel production

West Perth-based Sterling Biofuels International Ltd has deferred the start of production at its newly completed 100,000 tonnes per annum biodiesel plant after a spike in feedstock prices.

The spike in palm feedstock prices had not been reflected in the cost of biofuels, making the delay a prudent option, the company said in an announcement.

Its decision adds to a run of negative news for the biofuels sector, which has been adversely affected by taxation changes in Australia, fluctuating oil and feedstock prices, and technical problems at some new plants.

The full text of that announcement is pasted below

Sterling Biofuels International Limited (the "Company") (ASX Code: SBI) is pleased to announce that construction of the Company's 100,000 tonne per annum biodiesel plant is on time and within budget. Pre-commissioning has commenced and the plant is anticipated to have the capacity to commence production in July 2007.

However, given the continuing spike in palm feedstock prices without any corresponding increase in the biodiesel selling price, it is prudent to delay commencement of production until such time as feedstock prices begin to show a downward trend and become more favourable.

The Company believes that with rising feedstock production, feedstock prices will fall towards historical averages in the latter half of the year. When such a downward trend emerges and the Company makes a decision to commence production, a revised profit forecast will be released to the market.