Crude oil prices plummet – is biodiesel in grave danger?

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This post was last edited by yinkuilin6868 on 2015-12-10 09:13. The largest application area for biodiesel in China is in the blending of diesel fuels, followed by its use as a substitute for the chemical plasticizer DOP. The trends in the crude oil and blended diesel markets constantly influence the fate of biodiesel. What is the current situation of biodiesel? Is there a future for biodiesel amid the plunge in crude oil prices? 　　Recent declines in crude oil prices have continued unabated; OPEC has given up on production restrictions, and a strong dollar is putting pressure on the market. WTI and Brent prices have continued to fall sharply at low levels, causing distress in the petrochemical industry, with both WTI and Brent reaching their lowest levels in nearly seven years. Analysis of the current situation of biodiesel: Is it in grave danger? This year, the price of biodiesel in Shandong has continued to decline since the second half of the year. The price of blended diesel is affected by the low-cost diesel supplied by major producers and local refineries; furthermore, the ongoing fluctuations and decline in crude oil prices, along with a slow pace of economic growth in China, have led to low activity in industries such as mining and infrastructure construction, thereby reducing demand for diesel. The sales situation for blended diesel is poor, and in some areas, the low-cost diesel produced by local refineries is even 200 yuan per ton cheaper than biodiesel, eliminating any price advantage for biodiesel. Thus, the claim that biodiesel is in grave danger is not without basis. One of the negative factors is that in the past two months, areas in Shandong, Hebei and other regions where biodiesel is produced have experienced snowfall and foggy weather; as a result of these harsh conditions, some highways were closed to traffic. As a result, vehicles used for transporting hazardous materials are unable to travel on roads, and driving on side roads poses a risk of slippage; therefore, drivers of large vehicles have chosen to suspend their operations. Under these negative influences, it is also difficult for manufacturers to ship goods after receiving orders; they must wait until traffic conditions improve before they can resume normal operations. During this period, manufacturers generally maintained stable prices, keeping their inventories without making any adjustments. Second negative factor: With the arrival of winter, biodiesel faces the problem of a high freezing point, which causes diesel blending companies to ignore it; almost 90% of such companies in the northern regions have stopped purchasing biodiesel. Under these negative factors, most biodiesel manufacturers in the northern region have stopped production, and those that remain operational have seen a decrease in their output levels to varying degrees. Most of them manage to survive by relying on the limited demand from the chemical industry. Third negative factor: The prices of raw materials used in the production of biodiesel remain high, while the prices of diesel fuel and chemical products used in its downstream processing continue to fall. As a intermediate product, biodiesel is forced to see its profits shrink step by step, and it is now on the verge of operating at a loss. Some manufacturers, in an effort to ensure cash flow by reducing inventory levels, are now forced to sell products at a loss, complaining bitterly about this situation. Summary 　In general, amid the sharp drop in crude oil prices, the entire petroleum products industry is facing severe challenges. An oversupply has long dominated the petroleum market, and biodiesel, as a minor player in this sector, continues to be affected by negative factors. Under these various adverse conditions, the claim that it is in a critical situation is not unfounded. Looking at the history of biodiesel, every period of optimism is short-lived; demand for biodiesel fluctuates between short-term advantages and long-term disadvantages, making it difficult to achieve a sustained turnaround. Most manufacturers continue to struggle to survive in this challenging environment.