SHANGHAI (Interfax-China) -- China's rapeseed-based bio-diesel industry is still at an early stage despite the country's position as the world's largest rapeseed producer.
However, this is slowly changing as new advances in production techniques lower costs and government initiatives promote alternative fuels. Growing demand from the world's bio-diesel industry has already led to a surge in China's rapeseed oil exports, and demand from the energy sector may start playing an increasingly important role in China's domestic rapeseed market.
"China's rapeseed bio-diesel industry is still in an early experimental stage. As far as I know, only two or three companies may prepare to run. The impact on prices is still limited currently, as the cost is still too high and the industry does not yet have the benefit of scale," analyst at China International Futures Co. Ltd, Wang Xuan, said.
However, Liu Xinghua, an official with the Zhengzhou Commodity Exchange, thinks there is a lot of potential for rapeseed-based bio-diesel in China.
"About 60% to 70% of rapeseed oil in the European Union is used to produce bio-diesel," Liu said.
New technology may lower the high cost involved with bio-diesel production.
"Huazhong Agricultural University has developed direct technology that converts rapeseed oil to bio-diesel, which eliminates the traditional rapeseed oil squeezing process and is able to reduce production costs by 30% to 50% over existing rapeseed-based bio-diesel projects, the project's team leader," Wu Moucheng, said.
The technology will be deployed in a facility with a production capacity of 30,000 metric tonnes, set to start operation in June in Hubei Province, Wu said.
Wu said the project based in Tianmen is expected to increase its capacity to 100,000 metric tonnes of bio-diesel in a few years time. Over the next three to five years, five bio-diesel projects may be built in the Yangtze and Han River basin, which are the main production areas of rapeseed.
International players are also keeping an eye on the development of China's bio-diesel industry. Austrian company Biolux started construction late last year on a wholly-owned project to produce bio-diesel in Nantong City, in eastern China's Jiangsu Province.
"Construction on the first-phase of the project will be completed by the end of this year or early next year," purchasing manager of the company, Lin Xiang, said. The annual production capacity is 265,000 tonnes of bio-diesel from 700,000 tonnes of rapeseed.
Its production will be sold to EU countries and on the international market, according to various sources.
Today, there are approximately 120 plants in the EU producing about 6.1 million tonnes of bio-diesel annually. These plants are mainly located in Germany, Italy, Austria, France and Sweden, according to the European Bio-diesel Board.
Last year, the EU was the largest importer of China's rapeseed oil exports, which surged 372.5% to 144,763 metric tonnes, while imports fell 75.2% to 40,000 tonnes.
In response to growing demand from the world's bio-diesel industry, China will try to increase acreage and yield, as well as improve mechanized production and technology, official from the Ministry of Agriculture's Administration of Plantation Industry, Wang Shoucong, said at the 12th International Rapeseed Congress.
Data from National Grain and Oil Information Centre indicates China's rapeseed output last year remained at 12.2 million metric tonnes on the back of 6.74 million hectares, down from 13.054 million metric tonnes and 7.24 million hectares in 2005.
Analysts expected this year's acreage might drop further due to the warm winter and poor economic returns.
China is the world's largest rapeseed producer, and nearly 85% of its rapeseed is grown in the Yangtze River basin.
Commentary
The E.U., as a collective, is in fact the largest rapeseed producer.
The difference between the China and the E.U. is that the latter is well in advance in its biodiesel industry and rapeseed is produced primarily for this usage. China on the other hand produces most of its crop for edibles.
Oil price, comparative oilseed industrial feedstock prices and profit margins will determine whether China will adopt a more aggressive planting program.
© InterFax-China 2007.
This article comes from Interfax China Commodities Daily, a daily digest produced by Interfax News Agency in Mainland China. To receive 10 free copies of this, please e-mail david.harman@interfax-news.com.
