In Search Of a Turnaround

How economic factors could deflate a once robust German biodiesel industry
By Bryan Sims | January 12, 2011

Like their U.S.-based counterparts, German biodiesel producers appear to be facing the same economic plight, as macroeconomic factors have affected decisions whether to severely scale back production or completely shut down.

One producer in particular, EOP Biodiesel AG, announced in December that it had declared insolvency, meaning it was unable to meet financial obligations with lenders in order to obtain working capital to remain operating. EOP Biodiesel, which operates a 132,000 metric-ton (39 MMgy) rapeseed-based production facility in Falkenhagen, said in a statement that insolvency proceedings were opened in district court. Horst Piepenburg of Dusseldorf Law Firm was appointed provisional insolvency administrator for EOP Biodiesel.

“The company has suffered immensely from ramifications of an inadequate strategy in the past,” says EOP Biodiesel CEO Jorg Jacob, in a company statement. In October, it halted production following damage to its rapeseed oil mill, but EOP Biodiesel’s board “dismissed the notion that damage of the oil mill in October might have contributed to the current status.”

In its statement, the company said it sold approximately 120,000 metric tons of biodiesel in spring 2010, which accounted for 90 percent of its planned output for the entire year. Bengt Korupp, EOP Biodiesel’s chief production officer, states, “We have taken all required steps in order to start up the mill by early January again. That is still our plan. We want to carry on with production again.”

According to Frank Bruhning, spokesman for the German biodiesel industry association Verband der Deutschen Biokraftstoffindustrie e.V. (VDB), the German industry has a production capacity of nearly 5 million metric tons per year (1.5 billion gallons). He notes that several factors are causing other producers to shut down, one of them being a tax on B100 that came into effect in 2007.

“Prior to the B100 tax, much of the biofuel market consisted of biodiesel,” Bruhning tells Biodiesel Magazine. “In 2010, most of the biodiesel was sold into the blending market. But, the mineral oil companies have a tendency to buy their supply from larger [biodiesel] producers rather than from smaller ones. There were quite a few companies that went down as a result.”

Subsidized biodiesel from the U.S. continues to flow into European ports, Bruhning says, coupled with a differential export tariff from Argentinean biodiesel that continue to make German biodiesel prices uncompetitive. Additionally, a new directive is set to begin in January in which biofuel producers in Germany and Austria will need to certify their rapeseed and rapeseed oil will be sustainably farmed. In December, Germany imposed a more flexible calculation of certified biofuel feedstocks for a temporary period up to June 30.

“The sustainability certification might help a bit in keeping out subsidized product,” Bruhning says, “unless the U.S. and Argentina get that sustainability certification themselves, of course.”

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