New analysis from Frost & Sullivan reveals that total biodiesel consumption in the counties of the Asia Pacific region was 415,000 tonnes in 2006 and is expected to increase by 50 per cent CAGR to reach almost 8 million tonnes in 2013. The reason for the growth in the region was attributed to the strong degree of support given to the biofuels sector by many governments across the Asia Pacific region which is creating significant domestic markets, says the company.

Whilst the initial focus of the industry was on export opportunities, especially to the EU, domestic demand is emerging as an important driver for the industry in the Asia Pacific region. Many governments in the region have set formal targets for biofuels usage, imposed mandates on oil companies to blend biofuels, given taxation benefits to biofuels, or introduced other measures to stimulate the industry.

Said Mark Dougan, managing director at Frost & Sullivan Australia, “governments throughout the Asia Pacific region have made significant progress in introducing legislative or fiscal measures to support the industry and boost demand.

“These measures are creating an increasingly viable domestic market within the region.”

Whilst the high feedstock costs that have been a feature since late 2006 have damaged the commercial viability of biodiesel production, the long-term fundamentals remain unchanged. Hence the industry will continue to grow in the region.

The rapid increase in the costs of feedstocks, and particularly of palm oil, since Q3 2006 have provided a major challenge to the commercial viability of the industry, as this has not been accompanied by an increase in biodiesel selling prices. Consequently alternative feedstocks such as waste cooking oil and jatropha are being actively explored by producers in the region.

“Alternative feedstocks which are available at a lower cost than the main vegetable oils will enable the biodiesel sector to regain commercial viability”, adds Mr. Dougan. “However the potential volumes of these feedstocks that is likely to be available remains unclear at this stage.”

Asia Pacific biodiesel producers need to address the likelihood of continued pressure on feedstock costs and ensure that they can produce as cost-effectively as possible, whilst exploring alternative lower-cost feedstock supplies.

The report, Strategic Analysis of the Asia Pacific Biodiesel Industry, is part of the Chemicals & Materials Growth Partnership Service, from Frost & Sullivan