October 26, 2012, Toronto, ON – BIOX Corporation announced it has temporarily suspended production of biodiesel at its Hamilton facility based on the existing conditions within the U.S. biodiesel market.
The company will monitor biodiesel market conditions, including biodiesel production volumes as well as trading liquidity and pricing, to determine the appropriate time to resume production. Concurrent with the suspension of biodiesel production, BIOX has reduced its operations group by 17 positions on a temporary basis. During the temporary suspension of biodiesel production, BIOX will continue to operate the recently commissioned stand-alone glycerin refinement system to upgrade crude glycerin in inventory to technical grade glycerin.
"Our proprietary technology is one of the lowest cost biodiesel production platforms in the industry, however based on the EPA reported production volumes that have resulted in depressed prices and the volatility within the RIN (Renewable Identification Numbers) market, we believe that temporarily suspending biodiesel production at our Hamilton facility is the responsible decision," said Kevin Norton, CEO of BIOX Corporation. "Given our balance sheet, we are in a strong position to manage through this short-term setback. We remain confident in the long-term fundamentals of the broader biodiesel market, specifically given the 28 percent increase in the mandated minimum volume of biomass-based diesel for 2013, and we expect to resume production in due course."
Earlier this month, the U.S. Environmental Protection Agency (EPA) published U.S. biomass-based diesel production through September 30, 2012. In the first nine months of 2012, U.S. biomass-based diesel RIN generation exceeded 90 percent, or 1.356 billion RINs of the minimum volume of 1.5 billion RINs, mandated under the Renewable Fuel Standard 2 (RFS2) for 2012. As a relatively nascent industry, the production volumes reflect that producers have been slow to respond to the temporary supply/demand imbalances. BIOX expects these imbalances to be resolved in the near term, particularly in light of the increase in the minimum volume requirement of biomass-based diesel to 1.28 billion U.S. gallons, or 1.92 billion RINs in 2013 that was recently confirmed by the EPA.
RIN prices have fallen from $1.50 in January 2012 to as low as $0.40 in October 2012. As of October 24, RINs traded at $0.51. For each U.S. gallon of biodiesel sold in the U.S., 1.5 RINs are issued. RINs are required by obligated parties in the U.S., which includes all refiners and importers of transportation fuel, to show compliance with RFS2.
The current market conditions are impacting the construction timeline of BIOX's second facility in New York Harbor. BIOX has deferred procurement of certain long-lead time, capital intensive components and reduced its project planning team related to the construction of the New York Harbor facility. BIOX will update the market with an estimated commission date of the second facility in a timely manner.