Cheaper feedstock revives Chinese biodiesel plant

Fuqing City, China-based China Clean Energy (OTCBB: CCGY) said today it has resumed operations at its biodiesel plant, capable of producing 10,000 tons of fuel a year.

Its shares were down more than 14 percent in mid-afternoon trading.

China Clean Energy halted biodiesel production in March because of the rising cost of yellow grease, cotton-seed waste and rape-seed waste. The feedstocks increased from an average of RMB 2,500 ($366) a ton to RMB 3,413 ($500) a ton in the fourth quarter of 2007.

Meanwhile, China's mandated diesel wholesale prices remained at RMB 4,800 ($703) a ton, rendering profit impossible, the company said. In the interim, China Clean Energy focused on specialty chemicals.

But today, China Clean Energy said it's once again producing biodiesel, which now sells for RMB 5,500 to RMB 6,000 ($806 to $879) a ton. Feedstock prices have dropped to RMB 2,500 to RMB 2,700 ($366 to $396) per ton.

The company expects to produce 800 tons of biodiesel a month, generating a 23 percent gross margin.

"We are very excited that we have moved back into producing biodiesel. We are also hopeful that the continued growth in the demand for fuel in China will allow us to operate our biodiesel plant at close to full capacity," said Tai-Ming Ou, CEO and chairman of China Clean Energy, in a release.

In January, the company closed the private placement of 10 million shares of common stock to generate $15 million to build a 100,000 metric-ton biodiesel and specialty chemical plant at Jiangyin Industrial Park. The plant, which is still under construction, is expected to use waste palm oil from Indonesian and Malaysian suppliers.