Recently the case of a biodiesel manufacturer in Korea became known, which had to stop its production due to the poor quality of the Palm Mill Oil Effluent (POME) that it was trying to process.
In this situation, everyone will lose, the waste collector, the trader, the biodiesel company, the final blender… And everything seems to be solved through the courts, and it will be several hundred thousand dollars in damages, like this like the incredible cost of lawyers in a lawsuit of this type.
In any industry, the usual practice has always been to have a specification for raw materials. These specifications must be met, as they are stipulated in the contract.
It works in this way within the oilseed raw materials market for food, technical or animal feed use. Mainly because these raw materials derive from a market of oils for food, which have always had their demand covered. In other words, demand is «always» satisfied by supply.
If there is a sufficiently large supply, in other words, when the supply exceeds the demand, the buyer has the power of negotiation, who can put demands on the quality level and seek the best balance between price and quality. In this case the commercial work is to sell the product earlier and better than our competitors.
In the case that the offer is insufficient to cover the demand, the bargaining power is held by the seller, who auctions to the highest bidder. In this case, the commercial work is on the purchase side, it’s not only to pay more, you have to be able to deal with those matters that others cannot deal with. And take away a scarce resource from our competitors.
For the production of biofuels, the current and future situation is a clear market of demand.
The REDII Directive proposes a growing incorporation of raw materials considered “Advanced”, what it’s now known as a circular economy raw material, in other words, the use of waste. Use the word resource instead of waste.
These raw materials are detailed in Annex IX of the directive. This annex has two parts
• Part B with the well-known UCO and category 1 and 2 fats, with a contribution limited by a maximum percentage. The directive understands that it is a product with a mature and sufficiently developed market.
• Part A with the rest of raw materials, most of them to be developed, with the exception of POME and Tall oil, which are the only materials nowadays with certain volumes available.
At the same time, we are faced with the current scenario of prohibition in some countries of palm and soybean oil, the main commodities in vegetable oils.
We must also add an increase in the demand for residual raw material from current and ongoing HVO projects, which can double the world production of biofuels in 10 years.
The replacement of vegetable oils in biodiesel, and the new demand for HVO, give rise to a great need for oils from part A of Annex I.
These oils are originally waste, and their quality level is low or very low compared to first-use vegetable oils, for which most biodiesel plants in the world were designed.
Faced with this scenario of demand and quality, the one who pays more and better will take the product, and he must be capable of working with low-quality products.
Many managers have the myopia of whoever pays has the power, and this is true in markets where there is more supply than demand, in markets where demand is higher than supply, it is the opposite. Those who continue with that approach have a very difficult time sourcing and continuing the activity of their plants and their jobs.
A leader in the HVO market more than five years ago said that his investments were focused on being able to treat with low or very low-quality products, seeing his figures it seems to be the right strategy.
The quantity of raw materials in part A of Annex IX today is limited and of low quality, so for being able to treat them, today is a basic industrial skill, tomorrow will be a standard in the market. The waste collection is not an industrial business, the one who is capable of treating the matter will take it away. Whoever the supplier treats, it will keep the plant stopped.
Whoever does not adapt his plant to be able to work with low-quality oils, will have a very difficult continuity in the market.
The plant can be prepared to work with any acidity, sulphur, chlorine, etc, and complying with the standard, both, for its use for HVO and to obtain 100% prEN 14214 biodiesel. Contact us, from Technoilogy we can update your plant to be able to deal with future challenges.