December 17, 2007 (The Korea Times) – Use of biodiesel remains quite low at home. But the domestic biodiesel market seems to have reached saturation point already as demand fails to follow supply despite government efforts to increase the production and use of the alternative energy. South Korea has an annual production capacity of some 800,000 tons at the moment. But the demand is expected to remain at less than one-fourth of the supply, according to the Ministry of Commerce, Industry and Energy Monday.
Biodiesel is a diesel-equivalent fuel derived from biological sources such as vegetable oil, which could be used in unmodified diesel-engine vehicles. It is thus distinguished from the straight vegetable oils or waste vegetable oils used as fuels in some diesel vehicles.
Largely made from soybean oil, rapeseed oil and rice bran, the biodiesel fuel constitutes one of the two axes of biofuel along with the ethanol, which is made from feedstock with a relatively large amount of starch and sugar contents such as corn and sugar cane.
In a mid- and long-term roadmap to activate the production and use of alternative energy sources, the government decided to raise the proportion of biodiesel fuel with conventional diesel fuel by 0.5 percent every year to 2 percent in 2010.
“Under the government guideline, the domestic biodiesel market is set to expand to 180,000 tons next year from the current 90,000 tons,” a ministry official said. “But the demand is far below the current supply of 800,000 tons.”
Unfortunately for suppliers, the imbalance in supply and demand is leading to cutthroat competition. Currently, there are about 20 biodiesel companies registered with the ministry. But only eight of them have so far been chosen as the suppliers of major refiners.
SK Energy and GS Caltex would soon select their biodiesel suppliers for next year. But they do not have any plan to increase the number of official suppliers, according to company officials.
Moreover, several new players including Namhae Chemical, Unid, TKM Biodiesel Korea and Natural Energy are set to jump into the market in the first half of next year, heralding yet more fierce competition.
“We saw only two biodiesel firms in 2002, when the alternative energy was supplied on a trial basis. But other companies sprang up like mushrooms in the past couple of years,” the ministry official said. “We could face new problems unless the imbalance is tackled now.”