China Bio Energy reacts to Chinese market changes

By Ron Kotrba | February 10, 2009
Web exclusive posted Feb. 25, 2009, at 11:03 a.m. CST

As of Jan. 1, a new pricing regime for refined oil product went into effect in China a break from the last decade of fuel price controls set by the National Development and Reform Commission. According to China Bio Energy Holdings Group, the new scheme aims to link domestic oil prices closer to the changes in global oil markets in a "controlled manner," though.

China Bio Energy is a biodiesel producer and distributor, as well as a distributor of refined crude oil products like gas and diesel. In a Feb. 17 press release, the company reported that as a result of the new pricing scheme, the average sales price for its oil products decreased in January from a 2008 average of $2.28 per gallon of gas and $2.62 per gallon of diesel, to $1.77 per gallon of gas and $2.04 per gallon of diesel.

"The recent decrease in oil prices has put downward pressure on the company's oil distribution and retail gas station revenues, but as a distributor the company maintains a stable margin," China Bio Energy stated in a press release. "Since biodiesel is sold at a similar price to regular diesel, overall biodiesel revenues are also impacted. However, it's important to note that the company's biodiesel profit margins have largely remained the same due to the decline in raw material prices. Waste cooking oil, which currently constitutes over 50 percent of the raw materials used by China Bio Energy, has dropped nearly 50 percent. An important reason for this decrease is that many smaller biodiesel producers were forced to close recently due to their lack of distribution channels and economy of scale which prevents them to compete effectively." The company also noted its ability to process multiple feedstocks, giving it an advantage in buying more of the lower priced feedstocks at any given time.

According to China Bio Energy, it plans to soon add five to seven more retail gas stations, as well as expand its current biodiesel production capacity from 100,000 tons per year (approximately 30MMgy) to 150,000 tons per year (45MMgy) through acquisitions or new construction.
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