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United States, Asia, Europe and South American Markets Likely to Display Significant Growth
Countries in Europe are looking to bio-fuels such as biodiesel as a solution for reducing air pollution and greenhouse gas emissions. They are also expected to reduce their dependence on imported fossil fuels, while generating export revenues. Although domestic markets are likely to grow significantly from the current negligible base, biodiesel producers in the region are also likely to target export markets given the availability of low-cost feedstock in the region – primarily palm oil, Jatropha and hemp. Since feedstock is the single largest cost component in biodiesel production, this considerably less expensive feedstock give International Biodiesel Inc a significant cost advantage over producers in the European Union and the United States that primarily use rapeseed and soybean oil. International Biodiesel can export locally produced biodiesel at prices that are attractive to European and American buyers and still obtain healthy margins.
As most countries are net importers of fuel oil, several government-driven initiatives are encouraging domestic use of alternate fuels such as biodiesel to reduce dependence on imported oil. In addition to providing licenses for biodiesel production, tax allowances, and capital grants, many governments are planning to introduce mandatory quotas for bio-fuels. The initiatives of governments are also evident in the conduction of consumer education campaigns regarding awareness and use of biodiesel. The increased penetration of diesel-powered vehicles in many countries is expected to further help take biodiesel mainstream.
Market Segmentation
The market for fuel is universal; biofuels can be used in a wide
variety of ways. The market segments that exist today are:
A) Traditional retail sales where the average price of petroleum diesel in Northern Cyprus, Europe, Asia or South America ranges from $6 to $9 per gallon.
B) On a wholesale level, governments, distributors and large retailers buy biodiesel, in order to comply with national biofuel laws. Current international mandates are 2%, and will ramp up to 10% biodiesel, blended with all petrol-diesel by 2010.
Prices for blend-stock are $5 to $8 per gallon, wholesale, in large lots.
C) The market of crude, unrefined glycerine (the main byproduct of biodiesel production) has shrunk in response to the rise in volume available, however, the market for refined 95% or higher glycerin is still very strong. This product sells for an average $4 to $5 per pound. |
Target Market Segment Strategy
International Biodiesel will pursue all avenues to market our
products.
Our top priority will be to sell biodiesel locally at retail prices to maximize our percentage of profits.
We will also establish large, long term
wholesale contracts, with clients of
both our fuels and by-products. |