MarketLine Blog

The America’s Region Continues to Dominate the Biofuels Market

 

The global biofuels market grew at a strong rate in 2011. This is evidence that the market is continuing to play an increasingly important role in both helping countries to meet international green energy targets and providing a new source of energy to help dissipate the reliance on traditional fuels. Due to high biofuel production costs, the market is affected strongly by local government subsidies and can become unprofitable when a government reduces or pulls out from a biofuel subsidy program in any given country.

The global biofuels industry grew by 10.2% in 2011 to reach a value of $139.9 billion, representing a compound annual growth rate (CAGR) of 20.2% for the period 2007-2011. Volumes also increased in 2011, growing by 7.3% to reach a volume of 713 million barrels and representing a CAGR of 18.5%.

The America’s region continues to dominate the market and represents 75% of the markets overall value. The large bio-ethanol markets that have thrived in this region are largely due to continuing US subsidy of its domestic bio ethanol market and relevant crops.  US demand for ethanol has led to Brazil filling the production needs of the market and Brazil is the largest producer of ethanol from its sugar cane crop. Biodiesel consumption is limited in the America’s however.

In the Biodiesel market Europe continues to be the dominating market with France and Germany being the largest regional markets, but there is a limited ethanol market at present.  Some of the more developed European markets have yet to fully embrace biofuels leaving room for growth in Europe. However there are some strongly developing markets in Eastern Europe also, with the Russian market being completely undeveloped. One issue with the European market is the continuation of subsidy, for Instance Germany is slowly phasing out its support for the industry with the hope that the market will continue to grow without it. However, examples from other countries have been that when government subsidy is ended the market can dry out.

The Asian-Pacific market is likely to be main driver of growth in future years as the economies of India and China have seen strong demand for biofuels and an increase in investment and start-ups.

Industry Trends/Issues

Both Ethanol and Biodiesel are produced from a feedstock crop which is different depending on the availability of suitable crops. The biofuels market is affected heavily by the changes in price of its feedstock, for instance if there is reduced sugar cane production in Brazil or rape seed in France, the price of these ingredients can rocket and ultimately leave biofuel as a finished product, uncompetitive. However, new types of feedstock are continuing to be developed such as oil from the Jatropha plant in India and the continuing development of Algae grown products.

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