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Fulcrum Bioenergy files for Chapter 11 relief

  • Spanish Market: Biofuels, Emissions, Oil products
  • 13/09/24

A US company that had set ambitious plans to convert garbage into sustainable aviation fuel (SAF) and attracted investments from major airlines and energy companies filed for Chapter 11 bankruptcy protection this week.

Fulcrum Bioenergy and subsidiaries filed for relief before the US Bankruptcy Court for the District of Delaware on Monday, estimating outstanding obligations to over 200 creditors at more than $456mn. A lawyer representing Fulcrum, Robert Dehney, said at a Thursday hearing that the company was on the verge of declaring Chapter 7 bankruptcy, which typically involves liquidation of assets, before a late-breaking bid from an interested company prompted a change in plans.

Fulcrum chief restructuring officer Mark Smith said in a declaration to the court that the company wants to initiate the sales process and move through the chapter 11 process on an "expeditious timeline." Judge Thomas Horan on Thursday preliminarily approved various first-day motions, including a request to continue paying Fulcrum's handful of remaining employees.

Fulcrum began initial operations at its flagship Nevada facility in 2022, becoming the first company to commercialize a clean fuels pathway based on gasifying garbage and signing offtake agreements with BP, United Airlines, and others. The process at the Nevada site involved receiving and sorting landfill waste, converting that to a synthetic crude oil through a gasification process, and then sending that feedstock to a Marathon Petroleum refinery to be processed into a usable low-carbon fuel. Fulcrum eventually wanted to be able to upgrade the synthetic crude into SAF on site.

An archived version of the Fulcrum website, which is no longer online, also set plans for eventual biorefineries and feedstock processing facilities in Indiana, along the US Gulf coast, and in the UK and said its suite of facilities could ultimately support 400mn USG/yr of production capacity. But Fulcrum has reported few updates on its progress more recently, and there were signs of financial struggles. Multiple contractors have filed lawsuits alleging missed payments, while UMB Bank indicated in October last year that Fulcrum had defaulted on debt obligations.

The Nevada site ceased operations in May and plans for other US facilities are apparently on hold, though filings indicate that Fulcrum has not yet determined whether to begin restructuring proceedings for any subsidiaries outside the US.

Fulcrum's business "represents a revolutionary idea," Smith said in his declaration, but "as with all cutting-edge businesses, the cost of innovation has been born through delays in operations and the inability to anticipate issues based on prior ventures and experiences." There were necessary equipment changes after initial operations begun, but these were expensive and affected by supply chain delays, he said.

It is unclear how much feedstock was successfully delivered to Marathon, which declined to comment. The Hong Kong-based airline Cathay Pacific, which had signed an offtake agreement with Fulcrum, told Argus that it never received any SAF. Other companies that had signed offtake agreements did not immediately respond to requests for comment or declined to comment.

Fulcrum had been soliciting interest from potential buyers for months and finalized an agreement with a company called Switch LTD, which agreed this month to offer a "stalking horse" bid to purchase Fulcrum's assets for $15mn and issue a loan of up to $5mn to fund Fulcrum's bankruptcy cases. A stalking horse bidding method is a way to arrive at a minimum bid price that other prospective buyers then must exceed.

Filings before the court this week did not elaborate on the nature of Switch's business or its reasons for wanting to acquire Fulcrum's assets. Dehney described Switch as a "disinterested third party" and said that Fulcrum has received other interest from prospective buyers, some eyeing all of Fulcrum's assets and some just looking at physical property, intellectual property, or the UK subsidiary specifically.

Failure to launch

The idea of gasifying waste to produce fuel has long been attractive, since feedstock costs would be low and the Fischer-Tropsch chemical process to convert synthetic gas to liquids has been known for decades. Demand for low-carbon alternatives to jet fuel is high among major airlines, some of which have government mandates to meet or voluntary goals to rapidly scale up SAF consumption by 2030.

While Fulcrum's Chapter 11 filing "was not really a surprise" given its recent financial troubles, it could give investors pause about future projects aiming to use similar technology, according to BloombergNEF renewable fuels senior associate Jade Patterson. The large majority of SAF capacity currently and the bulk of planned capacity additions through 2030 come from the more established method of hydroprocessing non-petroleum feedstocks like fats, oils, and greases, Patterson said.

Efforts to build gas-to-liquids facilities, by comparison, have faced delays and financial challenges. Red Rock Biofuels had aimed for a refinery converting forest waste to begin operations in 2020, but the company that later acquired the Oregon site at auction is now targeting a 2026 launch for its clean fuels facility. And Fulcrum's plans for converting waste into fuel go back more than a decade, having inked its first deal with a municipal solid waste supplier in 2008.

Kickstarting a market for a novel fuel pathway has also not been helped by a dip over the last year for prices of US federal and state environmental credits, which function as a crucial source of revenue for biofuel producers. There is also uncertainty about how much federal subsidy certain fuels will earn when an Inflation Reduction Act tax credit for low-carbon fuels kicks off next year.

But other gas-to-liquids companies are marching on — including DG Fuels, whose president told Argus last month that the company plans to reach a final investment decision by the first quarter next year on a potentially 178mn USG/yr SAF plant in Louisiana that will gasify biomass. The company has earlier-stage plans for similar facilities in Maine and Nebraska.


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04/11/24

Mexico GDP outlook dims in October survey

Mexico GDP outlook dims in October survey

Mexico City, 4 November (Argus) — Private-sector analysts have again lowered their projections for Mexico's gross domestic product (GDP) growth this year, with minimal changes in inflation expectations, the central bank said. For a seventh consecutive month, median GDP growth forecasts for 2024 have dropped in the central bank's monthly survey of private sector analysts. In the latest survey conducted in late October, analysts revised the full-year 2024 growth estimate to 1.4pc, down from 1.46pc the previous month. The 2025 forecast also dipped slightly, to 1.17pc from 1.2pc. The latest revisions are relatively minor compared to the slides recorded in preceding surveys, suggesting negativity in the outlook for Mexico's economy may be moderating. This aligns with the national statistics agency Inegi's preliminary report of 1.5pc annualized GDP growth in the third quarter, surpassing the 1.3pc consensus forecast by Mexican bank Banorte. Inflation projections for the end of 2024 inched down to an annualized 4.44pc from 4.45pc, while 2025 estimate held unchanged at 3.8pc. September saw a second consecutive month of declining inflation, with the CPI falling to 4.58pc in September from 4.99pc in August. The survey maintained the year-end forecast for the central bank's target interest rate at 10pc, down from the current 10.5pc. This implies analysts expect two 25-basis-point cuts to the target rate, most likely at the next meetings on 14 November and 19 December. The 2025 target rate forecast held steady at 8pc, with analysts anticipating continued rate reductions into next year. The outlook for the peso remains subdued, following political shifts in June's elections that reduced opposition to the ruling Morena party. The median year-end exchange rate forecast weakened to Ps19.8 to the US dollar from Ps19.66/$1 in the previous survey. The peso was trading weaker at Ps20.4/$1 on Monday, reflecting temporary uncertainty tied to the US election. Analysts remain wary of Mexico's political environment, especially after Morena and its allies pushed through controversial constitutional reforms in recent months. In the survey, 55pc of analysts cited governance issues as the primary obstacle to growth, with 19pc pointing to political uncertainty, 16pc to security concerns and 13pc to deficiencies in the rule of law. By James Young Mexican central bank monthly survey Column header left October September Headline inflation (%) 2024 4.45 4.44 2025 3.80 3.80 GDP growth (%) 2024 1.40 1.46 2025 1.17 1.20 MXN/USD exchange rate* 2024 19.80 19.66 2025 20.00 19.81 Banxico reference rate (%) 2024 10.00 10.00 2025 8.00 8.00 Survey results are median estimates of private sector analysts surveyed by Banco de Mexico from 17-30 October. *Exchange rates are forecast for the end of respective year. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil launches reforestation plan


04/11/24
04/11/24

Brazil launches reforestation plan

Sao Paulo, 4 November (Argus) — The Brazilian government launched its plan to reforest 12mn hectares (29.6mn acres) with native vegetation by 2030 as part of its efforts to meet its emissions-reductions target under the Paris Agreement. Of the 12mn ha of reforestation projected, 9mn ha will be on properties currently not in compliance with the 2012 forestry code, which requires property owners to maintain standing forest on a percentage of their land. Depending on the biome, property owners are required to preserve 20-80pc of native vegetation. The government estimates that nearly 24mn ha of privately owned land is currently not in compliance with the forestry code. The plan also foresees 2mn ha of reforestation on public lands, including conservation preserves and areas controlled by indigenous peoples. The remaining 1mn ha of reforestation will take place on degraded land which will be converted to be used for low-carbon agriculture. The government will provide financing and technical support for the reforestation program. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Construction spending up in September, asphalt weakens


04/11/24
04/11/24

Construction spending up in September, asphalt weakens

Houston, 4 November (Argus) — US construction spending rose slightly in September, with spending on highways and streets higher. Still, asphalt prices declined. Total highway and street spending rose by 0.4pc in September from August to a seasonally adjusted annual rate of about $141.95bn, according to the latest data from the US Census Bureau. This was 1.5pc above September 2023 levels. Despite the increase in highway spending, wholesale asphalt prices in the US midcontinent hit a four-year low for September on excess supply and subdued demand. Midcontinent railed asphalt prices dropped by $45/st for September delivery to $290-$320/st from August. Waterborne prices in the region saw a similar, $45/st decrease to $300-$335/st. The sharp decline stemmed from turnaround activity beginning in late August at BP's 435,000 b/d Whiting, Indiana, refinery which boosted supplies as adverse weather in the southeastern US stifled wholesale demand. The National Weather Service reported above-average precipitation from Louisiana to Virginia in September with Tennessee seeing its fourth wettest September on record. Hurricane activity in early July and late September also impacted demand for the month with construction firms reporting lower third quarter product shipments because of extreme weather conditions. Total spending was up 7.3pc through the first nine months of 2024 compared to the same period in 2023. Private construction spending was supported by residential investment while nonresidential spending fell. Manufacturing spending fell while commercial spending rebounded from August, reversing previous month's trends. Spending on water supply continues to grow. By Aaron May and Cobin Eggers US Construction Spending $mn 24-Sep 24-Aug +/-% 23-Sep +/-% Total Spending 2,148,805.0 2,146,048.0 0.1 2,055,216.0 4.6 Total Private 1,653,624.0 1,653,160.0 0.0 1,592,388.0 3.8 Private Residential 913,632.0 912,186.0 0.2 877,629.0 4.1 Private Manufacturing 234,302.0 234,803.0 -0.2 194,941.0 20.2 Private Commerical 119,191.0 118,927.0 0.2 139,861.0 -14.8 Total Public 495,182.0 492,888.0 0.5 462,829.0 7.0 Public Water/Sewage 76,805.0 76,462.0 0.4 69,634.0 10.3 Public Highway/Road 141,049.0 140,349.0 0.5 138,694.0 1.7 US Census Bureau Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Saudi Luberef’s profit down on year in Jan-Sept


04/11/24
04/11/24

Saudi Luberef’s profit down on year in Jan-Sept

Singapore, 4 November (Argus) — State-controlled Saudi Aramco's base oil subsidiary Luberef posted a significant decrease in profit in January-September as a result of lower margins. Profit in January-September dropped by 38pc from the previous year to 764mn Saudi riyals ($203mn), although revenue rose by 6.5pc on the year to SR7.4bn. This is because base oil and by-products margins decreased. Luberef's base oil sales volumes in the first nine months of this year were up 1pc to 929,000t as compared with 918,000t in the same period last year. Luberef's profit in the third quarter was down by 34pc on the year to SR226mn, against a 2pc on the year drop in revenue to SR2.5bn. Argus -assessed Asian fob Group I and II base oil export prices were largely lower over the third quarter, especially for light grades, while heavy-grade prices were relatively supported because of tighter supply. The Yanbu "Growth II" expansion project is expected to completed at the end of 2025, the company said. This will bring the base oil production capacity at the Yanbu facility to around 1.3mn t/y. Luberef is also studying a project to produce Group III/III+ base oils, which is at the pre-front end engineering design stage. By Chng Li Li Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

October a record month for AOM Ucome trading


01/11/24
01/11/24

October a record month for AOM Ucome trading

London, 1 November (Argus) — Used cooking oil methyl ester (Ucome) had its strongest month yet on the Argus Open Markets (AOM) deal initiation platform in October, with 107,000t changing hands. Ucome activity more than quadrupled on the month after only 26,000t traded in September. Ucome traded in October made up 19.6pc of total Ucome volumes traded in 2024 so far. For all three products combined — RME, Ucome, and Fame 0 — October 2024 was the most active month of trading since August 2023, and before that, July 2022. RME trade totalled 145,000t, a 150pc increase from September, and 104,000t of Fame 0 changed hands, a 108pc increase. In total, 356,000t of biodiesel was traded in October, up from 134,000t in September and 143,000t in August. The rise in activity aligned with the start of the new quarter and some major news for the market. At the end of September, Germany proposed a draft bill that would prevent excess greenhouse gas (GHG) quota tickets from being carried into 2025 and 2026. GHG quota tickets are the compliance mechanism for the GHG reduction mandate that governs biofuels usage, and the market is heavily oversupplied at the moment, pressuring down prices and encouraging companies to buy and use tickets rather than physical biofuels. By starting from scratch for 2025, participants except demand to pick up substantially, although until the end of 2024 tickets will remain the cheaper option. The immediate response to the announcement of the draft bill in Germany was a surge of activity in the related paper markets for the fourth quarter, a final piece encouraging physical trading. As of the last day of the October contract, open interest stood at 1,742 lots for Ucome, 1,167 lots for Fame 0, and 2,472 lots for RME. Total open interest for the fourth quarter was 4,655 lots for Ucome, 4,396 lots for Fame 0, and 7,529 lots for RME, according to Ice data. Many companies with strong paper positions will manage exposure by trading some portion of the total volume in the spot market. The Dutch government confirmed that the country's ticket carry-over levels will be reduced, which should also increase biofuels demand next year. Biofuels mandates throughout Europe go up at the start of the new year, along with the introduction of ReFuel mandates for aviation and shipping. This all combines for a much more positive outlook for 2025 demand than the market expected, as well as stronger competition for supply. The increase in trading started a quarter ahead, as companies look to take advantage of the changes, prepare for 2025, and still cover any shorts until the end of this year. European producers have been struggling with low production margins, which has slowed down production levels. European supply has tightened because of this and imports are down because of provisional anti-dumping duties on China, which may have also encouraged some companies into the window to find product. In the macroeconomic environment, volatility in energy markets following increased tensions in the Middle East also prompted some trading, as the Ice gasoil contract underpins European biodiesel prices and has closely followed military developments. Some participants reported an overall higher risk appetite for the fourth quarter after several months of very subdued market activity. By Simone Burgin Monthly AOM trade volumes t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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