Gushan announces significant drop in biodiesel production

By Erin Voegele | December 29, 2011

Chinese biodiesel producer Gushan Environmental Energy Ltd. recently announced its financial results for the third quarter of 2011, showing that the company’s biodiesel sales volume has decreased by 94 percent since the same quarter last year. Furthermore, the year-over-year decrease for the company is 97.6 percent. While the company has only been producing at a small fraction of last year’s production level, the average selling price for the fuel it has made increased by 44.9 percent on a year-to-year basis, increasing to a price of approximately $1,062 per ton.

While Gushan’s other business segments, such as copper recycling, grew over the past year, Jianqiu Yu, the company’s chairman and principal executive officer, noted that his company’s biodiesel business has suffered due to raw materials shortages. These shortages, he said, have occurred despite a continued rebound in diesel prices and some moderation in raw material cost inflation. “We are carefully monitoring market conditions as we evaluate resuming production at idled plants,” Yu said.

According to information released by Gushan, the company’s revenue for its biodiesel business totaled only $300,000 for the third quarter of 2011, which is a 95.8 percent decrease from the revenue reported during the same quarter of 2010. Information published by Gushan further stated that the declines in biodiesel revenue are attributed to the continued suspension of production at most of Gushan’s biodiesel plants due to unfavorable market conditions. The decline is also attributed to temporary shortage of raw materials due to local governments cracking down on certain alleged practices of used cooking oil that forced some feedstock suppliers to suspend operations.

 Gushan reports selling only 203 tons of biodiesel during the third quarter, a 97.6 percent decrease when compared to the 8,363 tons the company sold during the same quarter in 2010. It is also an 80.2 percent decrease when compared to the 580 tons of the product that were sold during the second quarter of 2011.

The quarterly report also stated that, as announced in 2009 and 2010, Gushan suspended or deferred biodiesel production in certain plants due to several reasons, including issues with the consumption tax, traffic controls pursuant to government directives and the relocation of a production facility. The consumption tax issue has now been resolved. As a result, subject to certain conditions, pure biodiesel made from waste animal fat or vegetable oils is exempt from China’s consumption tax; however, feedstock prices have continued to rise in 2011. As a result, Gushan said it is currently evaluating the profitability of each of its biodiesel plants and will evaluate the appropriateness of continuing, commencing, or resuming production at each of its facilities. The company also noted, however, that only plants that can operate on a positive cash flow basis will be put into production. 


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