Now Australian Biodiesel Group shuts down production!

The headline for this post was going read “Another one bites the dust” but that isn’t quite correct. The Australian Biodiesel Group (ABG) are down but not out. In an announcement to the Australian Stock Exchange today ABG listed the following series of measures they are undertaking to limit financial loss:

  • The sale of ABG’s Moree oil crushing mill for $2.64 million.
  • Reducing overhead costs, including staff and office facilities, to a minimum consistent with remaining a publicly listed company.
  • Reducing the number of staff at the company’s Narangba biodiesel production facility consistent with the low level of demand for biodiesel projected in the immediate future.
  • Only producing biodiesel when doing so improves the company’s financial position.
  • The continuation of sale of other non-core assets of the company.

According to ABG and Australian Renewable Fuels (previous post) current market conditions and Government policy have resulted in the cost of producing biodiesel exceeding the price it can be sold for. Both companies have now decided they can no longer continue production under current conditions.

ABG’s Narangba plant will be put on standby, retaining sufficient skilled operators employed to facilitate a rapid return to production, when demand and costs allow profitable manufacture.

The following list highlights the key factors hindering the ABG’s performance:

  • Ineffective and unstable policy settings continue to undermine the biodiesel industry. In the view of the Board, the 350 million litre biofuel target policy mechanism has failed to establish market access via the crucial oil majors, as had been anticipated by the company. Without access to the customers of the majors, ABG has been unable to generate the volumes required for the company to be profitable. Significant changes to fuel excise arrangements on 1 July 2006 and ongoing uncertainty related to Government fuel standards has further hampered the viability of the biodiesel market.
  • As with other Australian biodiesel producers, ABG has experienced significant rises in raw materials costs over the second half of 2007. The company’s Rights Issue Prospectus of 23 March 2007 detailed an assumption of a tallow price of $580 per tonne. However, tallow has recently traded at over $950 per tonne, with indicative tallow offers for November of $975 per tonne, making production costs unsustainable.

Sound familiar don’t they? Exactly the same issues that caused Australian Renewable Fuels to mothball their two plants. The future of tallow based biodiesel production in Australia definitely looks bleak.

Source: ASX (thanks for the tip Sreenivas)

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10 Responses

  1. This is horrible – the result of John Howard’s policy… job loss!

    They can’t get away with job loss in Tasmania or the claimed losses resulting from achieving carbon cuts. But an environmentally sustainable fuel (not palm oil based)….. grrrrr!!

  2. […] Оригинал сообщения от Luke Hallam тут… […]

  3. I like the analysis because it points up how much the biofuel industry relies on legislation for its existance, and you can’t easily control or influence what goverments are going to do as a company… and secondly the absolute need to be able to reach customers, which seems not to have happened.

  4. This is a national tragedy. Now that Australia has signed Kyoto we can but hope that a more thoughtful Rudd Labor Government will take action to get this important industry going again.

  5. The billions in government subsidies for coal could have been offered to renewable and environmentally friendly energy industries like Biodiesel production.

    Check out

    http://www.greenpeace.org/australia/news-and-events/media/releases/climate-change/billions-of-taxpayer-dollars-c

    Why do we keep allowing our governments to support industries like coal when they could support future sources?

  6. How much of this had had anything to do with the large petroleum based companies and their stranglehold on the market? Are they lining the pockets of the politicians so that renewable fuels are pushed to the side and the sale of the petroleum based fuels can have the market conquered and therefore charge us what they want!

  7. I have worked for a major oil company for a long long time, and i can state this as fact. The rising cost of fuel helps two poeple. Major oil companies through there highjacking of bowser price and the government excise scheme. The more you pay for fuel the more excise the government collects, and the better the profit margin for the majors. Now one oil company has recently had a major upgrade which went many millions over budget and are now hoping to push the speculated crude price higher to drive up the fuel price to help offset the cost of this, which can be wholly blamed on inept managrment. The government wont object as they will reap more excise. What the majors dont want any to know is tat they process low quality crudes, notbenchmark which means that the real crude price in this country is around $45 – $50 aud per barrel, therfore while they scream poor at the crude price, labour cost, utillity cost and the like they are actually making absolute record profits and are laughing not only all the way to the bank, but at the consumer who is being raped at the bowser. So yes, collusion between oil companies and the government has again killed another good idea. Alot like RAlph Sarich and his orbital engine.

  8. The above comments would be fine except that tallow already has existing uses in food, industrial ingredients and personal care. Its direct substitute is Palm Oil, so if the Australian government subsidizes use of tallow in fuel, then traditional tallow users who do not get the subsidy will have to buy palm oil. Approximately 100,000 hectares of new palm plantation would be required to replace the 500,000t of tallow used in existing applications….not so green afterall !!

  9. This tragedy was bound to happen!
    At the stage of panning a major investment and taking up an innovative product, the raw materials supply position has to be given due importance.
    Particularly so when the raw material is agricultural based as seasons have a major impact on quantity & quality of product.

    And there should be a provision in the plant selection to suit an alternate product.
    This will ensure success of the investment.

  10. When investments plans are made one important aspect is availability of raw materials in sufficient quantities throughout the year.

    When the raw materials happen to be agl based as in the case of biofuels, the supply position is always uncertain due to monsoon which is the key factor .

    Added to this, the oil lobby and some interested groups began a slandering campaign against biofuels as they certainly pose a threat to the monopoly of OPEC.

    So it is certainly the fault of the entrepreneurs to have started in a gung-ho spirit which is the cause of the present sorry state.

    Ram

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