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The Future of Biodiesel – Will it Be Sustainable?

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Frost & Sullivan Analysis of the Biodiesel market.

Frost & Sullivan Analysis of the Biodiesel market.

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  • 1. POC Conference, March 10 th- 12 th 2009 Developed By Frost & Sullivan Consulting Team Frost & Sullivan www.frost.com The Future of Biodiesel – Will it Be Sustainable? Price Outlook for 2009
  • 2. Frost & Sullivan : Leading growth consulting company with over 45 history and 1800 staff in 35 offices in 26 countries 12 th March 2007, © Frost & Sullivan
    • London
    • Kuala Lumpur
    • Singapore
    • Mumbai
    • Chennai
    • Beijing
    • Tokyo
    • Toronto
    • Frankfurt
    • New York
    • San Antonio
    • Shanghai
    • Sao Paulo
    • Buenos Aires
    • Palo Alto
    • Paris
    • Sydney
    • Seoul
    • Mexico City
    • Cape Town
    • Tel Aviv
    • Warsaw
    • Bogota
  • 3. Frost & Sullivan expertise in biofuels : we provide strategic advice over the whole palm to biofuels value chain 12 th March 2007, © Frost & Sullivan
    • Technology Analysis Biodiesel Market
    • European Biodiesel Market
    • Asian Biodiesel Market
    • US Biodiesel Market
    • Brazilian Biofuels Market
    • Several Due Diligence Projects for Investors
    • Market Assessment and Strategy for Players
    • Business Planning and Fund Raising
    • Information Memorandum for Several Players
    • Feedstock and Off-take Sourcing
    • Reports
    • Consulting
  • 4. Confidential to Frost & Sullivan … .. What we said last year at the POC (Feb. 2008) We could get to 4000 RM quicker than we think Written 5 days prior to POC 2008
  • 5. Confidential to Frost & Sullivan … .. What we said last year at the POC (Feb. 2008) 4500 RM is now not out of reach at this rate Written 1 day prior to POC 2008
  • 6. Confidential to Frost & Sullivan … .. What we have been saying for the last 2-3 years Same as internet lifecycle! Infancy Boom Bust Reality
  • 7. Confidential to Frost & Sullivan 2007, early 2008 : lessons from the past – we will see some or all of this again, 2007 was just a warning High Crude Oil Price Bad Weather Commodity Price Shift Biofuels Extra Demand Subprime HIGH PRICES!
  • 8. Confidential to Frost & Sullivan Indeed palm prices are high due to the soy situation in South America at the moment – crops are now more interlinked Frost & Sullivan estimates 1 ?
    • Price
    • Increase
  • 9. Confidential to Frost & Sullivan Sustainability issue.... Q. Are Biofuels therefore sustainable, or can we expect more of this?
  • 10. Confidential to Frost & Sullivan Sustainability issue....
    • Yes, but …
    • They will only be part of the mix for fuels until cellulosic kicks in, or non-food crops in the case of biodiesel,
    • They will be prone to swings in profitability (“swing market”),
    • They are a financial game where hedging is of utmost importance,
    • It will thus be a game played by the big boys, esp, with plantations
    • The big suppliers will push the product onto the market – it is supply led rather than demand led, until proper legislation is put into place
  • 11. Confidential to Frost & Sullivan Sustainability issue....
    • This is still a market that needs:
    • Low feed stock prices,
    • Government mandates and subsidies,
    • High crude oil prices.
    • And all 3 need to ideally happen at the right time…..
  • 12. Confidential to Frost & Sullivan Profitability assessment : We can thus expect a lot of volatility in the market in line with crude oil!
  • 13. Confidential to Frost & Sullivan Profitability assessment : causing wild swing Source : FC Stone
  • 14. Confidential to Frost & Sullivan Biodiesel production is not the most profitable part of the value chain Feedstock Refining Biodiesel Logistics Distribution Blending/Retail * Relative Profitability
    • *With Rebate
    • Refining Traditionally Tough Business
    +ve -ve Mills
    • The value chain is unbalanced and typical of the chemical industry. To be successful one needs to piece value chain together, and work with partners
  • 15. Confidential to Frost & Sullivan So why such an interest still in biodiesel “ It is a political market from a Government perspective, and for plantation companies it is a great way to keep palm oil prices high”.
  • 16. Confidential to Frost & Sullivan Market will continue to look for ways to grow especially bioethanol – energy security/ politics will be a key reason behind this Frost & Sullivan estimates Millions of Litres BIOETHANOL 1 20 40 20 60 120 BIODIESEL 2000 2000 2020 2040 2020 2010
  • 17. Confidential to Frost & Sullivan … whether this model is sustainable over the mid to long term we will see. Growing population Crops Competing for Land Energy needs Water stress 1 2 3 4
  • 18. Confidential to Frost & Sullivan Thank you [email_address] +65 9615 8293