The Future is Today
Evonik is the leading supplier of sodium methylate worldwide, and in the U.S. We have been producing it for more than 40 years and now supply some 60 countries around the world. Our new plant in Mobile was built for the U.S. biodiesel market, where we expect growth to increase in the future. It is also a test platform for additional facilities currently under review.
You're probably thinking that this not the best time to start-up a multi-million dollar biodiesel catalyst plant, particularly with the industry and the global economy in flux, but we believe it is still a good investment. Biodiesel is part of the solution of some critical problems the world faces today. Despite the current market challenges, the industry will not go away. It is expected to grow maybe not significantly over the next two or three months, but definitely over the coming years.
Things have definitely changed since we started building this project. And they will transform again in the next half a year. Change is constant. We must learn to adapt. When we decided to invest in our first U.S. sodium methylate plant the first outside of Germany the growth prospects of the American biodiesel industry where bright. Now, the industry is facing its worst crisis in its still very young history. The financial upheaval was much deeper than anybody could predict: oil prices have fallen more sharply; the European Union (EU) has imposed a duty on biodiesel from the U.S.; and the mandatory blending of biodiesel into mineral diesel has still not been enforced in the U.S.
But rather than sit back and complain about the situation, we need to look ahead. The economic crises will eventually ease, although no one can honestly predict when that will happen. Oil prices will move up again in the long run, since supply remains limited and the energy requirements of the global population will grow. And the final EU ruling on the countervailing duty will have an important impact on North American biodiesel as will the enforcement of the mandatory blending. As the global economy adjusts, there will be increased calls for sustainable fuels. Does anyone really believe the price of oil will remain, relatively speaking, in the $40 a barrel range forever? Once these factors change, the U.S. biofuels industry will once again regain its footing.
We expect double digit growth for biodiesel worldwide. Right now the demand for biodiesel in the U.S. is less than what we had hoped, but the outlook of the industry is still strong.
We see a bright and profitable future ahead. We strongly believe in sustainability, so having a robust U.S. biodiesel market is important. We must work towards strengthening the sector. In the past, many U.S. biodiesel producers concentrated on exports, sending nearly 75 percent of their product to Europe. But the U.S. biodiesel market should not be based on exports-it should be based on local demand. Thus, we believe that building up the biodiesel industry in the U.S. should be a top priority.
Biodiesel has proven to be a viable fuel that helps in the fight against climate change, reduces the dependency on foreign oil (approximately 70 percent of the U.S. oil consumption is imported) and provides jobs. Thus, the Renewable Fuel Standard (RFS2) is essential to breaking our over-dependence on imported oil. With the RFS2, we put ourselves on a clear path of producing and using steadily increasing levels of a variety of biofuels over the next 15 years. We believe, because of sustainability and the future of the planet, that the biodiesel market should be larger. One billion gallons of biodiesel in the U.S. represents only 2.5 percent blending. Europe has 5.25 percent and will increase to 10 percent in two years. Brazil has 3 percent blending now, which will rise to 4 percent in July and 5 percent by 2010. Brazil is looking to further increase that portion. Other countries already have or are implementing an initial 5 percent blending. So there is still potential in the U.S. market by increasing blending rates.
Evonik believes in sustainability it is a major issue for us and reducing the impact humans have on Mother Nature. We also believe in sound science. We do not support any practices which cannot comply with sustainability criteria. Biodiesel has proven to be a sustainable fuel whenever sound science has been applied.
The world needs biodiesel. Despite the difficult times, we still believe we made the right choice to invest in a state-of-the-art plant in the U.S. to support the growth of an industry that we are convinced with ultimately succeed. We must bring our case not only to the political leaders, but also to the citizens of the world. Merely hoping that the EU will revoke its decision on countervailing duties for imports of US-produced biodiesel would mean ignoring the real source of the current problem generating more local demand for biodiesel.
Jose Berges is Evonik's head of electrolysis products and alkoxides business line.