Biodiesel demand survives pandemic slump – Western Producer

The oilseed-based biofuel has fared better than ethanol because of its use in the trucking sector, which hasn’t slowed

COVID-19 slashed corn demand from the ethanol sector but it temporarily boosted canola demand from the biodiesel industry, says an official.

The impact of the pandemic on North American biodiesel production has been minimal, said Chris Vervaet, executive director of the Canadian Oilseed Processors Association.

In the United States, which is the main North American market for the fuel, production was actually up in 2020 versus year ago levels.

U.S. manufacturers produced 5.7 billion litres of the fuel through the first 10 months of 2020, a three percent increase over the same period a year ago, according to the U.S. Energy Information Administration.

ADVERTISEMENT

By comparison, the International Energy Agency is forecasting a 12 percent drop in U.S. ethanol production in 2020 to 52 billion litres.

Monthly biodiesel production volumes did fall below 2019 levels in April and May but they quickly recovered and have been higher in every subsequent month.

That is primarily because biodiesel is used a lot by big trucks and industrial machines and their movement hasn’t slowed during the pandemic, said Vervaet.

So while there was a setback during the initial phases of the economic slowdowns in Canada and the U.S., it proved to be very temporary.

“And then something quite interesting happened that we really didn’t anticipate,” he said.

Availability of competing biodiesel feedstocks started to dry up, leading to more consumption of soybean and canola oil by biodiesel manufacturers.

There was less used cooking oil on the market due to closures and restrictions in the restaurant business. And there was reduced tallow production as slaughter facilities faced COVID-related shutdowns.

“The supplies were not there anymore, at least not at the volumes that biodiesel operators were used to,” said Vervaet.

ADVERTISEMENT

Canada’s canola crushers helped fill the temporary gap in the market.

The biodiesel industry’s demand for canola oil is not that large compared to the food sector, but it is growing and that growth is expected to explode in the coming years.

Vervaet estimates that about five to 10 percent of Canada’s canola oil is consumed by the global biodiesel industry. It is a small but vital market.

“What’s really exciting for our industry is that we see it becoming an increasingly important part of the business,” he said.

In 2019, 23 percent of Canada’s canola oil production was used domestically with the remainder exported. The U.S. accounted for 57 percent of exports that year.

Shipments to that market could expand dramatically due to California’s Low Carbon Fuel Standard. That has given rise to a vibrant renewable diesel industry in that state.

Canadian canola oil is not yet approved as a feedstock for U.S. renewable diesel, but the Canadian canola sector is working on it.

ADVERTISEMENT

The other promising new development is Canada’s proposed Clean Fuel Standard (CFS), which is also expected to create substantial new demand for the commodity.

The Canola Council of Canada believes the CFS could eventually create a market for Canadian canola rivaling Japan’s annual export demand for the commodity.

That is why Vervaet believes the biofuel sector will eventually account for far more than five to 10 percent of total oil demand.

“It’s a big priority for us,” said Vervaet.

Barely any Canadian canola oil is shipped to the European Union, and that may be a blessing.

According to the International Energy Agency, COVID-19 had a far more profound impact on EU demand for the fuel than it did in North America.

EU production of biodiesel and renewable diesel is forecast to plummet to 13.6 billion litres in 2020, down from a record 15.7 billion litres the previous year.

“A key factor in this reduction is the COVID-19 pandemic, which reduced EU biodiesel demand by 10.5 percent in 2020,” the organization stated in a recent fuel report.

“Furthermore, storage capacity is saturated and the price of biodiesel has fallen more quickly than the cost of feedstocks, challenging biodiesel production economics.”

The good news is that EU production is expected to fully rebound and set a new record of 15.8 billion litres in 2021.

While Canada doesn’t ship much canola oil to the EU, it has become one of the country’s top export markets for canola seed in recent years. That seed is crushed in the EU and the oil is used to produce biodiesel.

Leave a Reply

Your email address will not be published. Required fields are marked *