Continued government subsidies and falling feedstock prices are forecast to continue decreasing biodiesel prices over the next three years
Los Angeles, CA (PRWEB) April 28, 2015
Biodiesel has a buyer power score of 3.7 out of 5. This score reflects a moderate level of buyer negotiating power stemming primarily from favorable pricing trends over the past three years. “Biodiesel is a highly regulated and relatively standardized product, which improves buyer power by reducing variability in quality. Additionally, product specialization is limited to unique circumstances, such as high cetane rated vehicles. Low specialization improves buyer power by making it easier for buyers to shop around for the best deal,” according to IBISWorld business research analyst Kevin Young. Buyers have ample supplier options, as evidenced by medium market share concentration and the entry of many new suppliers into the market. Some of the market’s top suppliers include Darling International, Louis Dreyfus Group, Archer Daniels Midland Company and Bunge Limited. These factors benefit buyers by creating high price competition. Buyers are further aided by low switching costs, which allow them to switch service providers with minimal cost if their current supplier is not meeting budgetary and regulatory criteria.
During the next three years, prices for biodiesel are expected to fall at an even faster pace. Although demand for biodiesel fuel is anticipated to increase due to government tax and subsidy incentives, decreasing feedstock prices are projected to cut production costs for manufacturers. Biodiesel suppliers will be forced to lower prices and profit margins as the price of crude oil continues to decrease; this factor will lower the price of petroleum-based diesel, a direct substitute for biodiesel.
The prices of input materials, such as oilseeds and soybeans, are extremely volatile and may experience sudden spikes, which are usually passed on to the buyer in the form of fluctuating biodiesel prices. “The supply chain of these upstream inputs is extremely volatile due to unpredictable yields and changing weather patterns in key growing areas. Therefore, buyers can consider securing longer-term contracts to lock in prices,” Young says. However, holding off on biodiesel purchases may benefit buyers because prices are projected to drop further in the coming years. For more information, visit IBISWorld’s Biodiesel procurement category market research report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Like IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of biodiesel. Biodiesel is an alternative fuel produced by the transesterification of vegetable oil or animal fat feed. There are a number of methods to carry out the transesterification process, including the ultrasonic method and microwave method. Biodiesel can be used as a pure fuel or blended with other oil-based fuel products, which can be sourced from manufacturers, wholesalers and retail outlets. This report excludes other alternative energy sources, such as diesel, gasoline, ethanol and solar power.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.