Monday, July 28, 2008
Olympics to cause RC fuel price increase Categories - Fuel, Industry, Racing , trackback
There has been much talk recently about the short supply of nitro but it would appear the up coming Olympic Games in China will cause a price increase of between 15 & 20% in the retail price of model car fuel. The biggest reason for the increase is that the main factories supplying nitro to model fuel manufacturers have been closed for the duration of the games as the Chinese try to reduce air pollution levels to those set out by the International Olympic Committee.
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Merlin Fuel have told us that since January there has been almost a 60% increase in the price of nitro and this combined with the bad supply is causing problems, in particular for smaller fuel manufacturers. Merlin who say they have large enough stock levels to maintain current fuel prices until October have had approaches from a number of European rival manufacturers looking for a supply of nitro.
The current short supply of nitro is not just effecting the rc market but also Drag Racing in the US with the governing body the NHRA impossing a ban on testing for nitro burning Top Fuel cars. A number teams are also being forced to use alcohol to warm-up engines in an attempt to preserve Nitro stocks. The following youtube video gives an good insight to the problems currently being faced by the NHRA.
EFRA are aware of the issues regarding nitro and are already working towards reducing the levels of nitro used by each category of gas racing. A proposal to reduce the maximum permitted nitro level for each class is currently under discussion by EFRA’s technical committee for both the reasons of cost and to help reduce engine power. Sander de Graaf, the 1:8 Onroad Section Representative for EFRA, told us that the use of alternative bio fuels for the sport is being discussed.
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uel Shortage Q & A
Ken Cutler, Senior Vice President
Great Planes Model Distributors
With all sorts of wild rumors and speculation flying everywhere
regarding the
availability of nitro methane hobby fuel, we thought that it would help
if we tried
to clear up the confusion by answering some of the most frequently asked
questions we have been receiving.
Q. I heard that one nitromethane factory closed which has created a
massive shortage in fuel. Is that true?
A. Not really. There are only two large capacity plants in the world
that produce
fuel grade nitromethane suitable for use in hobby fuels. One is in the
US, the
other in China. Both are still fully operational and conducting business
as usual.
The US plant that supplies many of the US hobby fuel bottlers has
decided to
temporarily reserve all of its production capacity for other more
profitable
business sectors such as pharmaceutical and agricultural products where
demand
is skyrocketing.
This decision left several bottlers scrambling to re-source their
nitromethane
supply, prompting them to eliminate availability of the over 20% nitro
blends in
order to conserve their nitro supply. This is a short term problem, not
a massive
shortage situation.
Great Planes has been assured by our factory that we have enough nitro
to
continue supplying all percentages of fuel, even those above 20%.
However, we
have been informed by Homeland Security that nitro percentages over 50%
can
no longer be produced. Current supplies can be bottled and sold but no
more
produced. There is absolutely no truth to the rumor that the FBI is
closing down
nitro methane plants because of Homeland Security issues.
Q. Is there a shortage of nitromethane production?
A. Yes and No. There are no problems related to the production of
nitromethane other than the Chinese factory being limited to a five day
work
week. This limitation is not new and is and has been a problem for all
factories in
most of the industrial areas of China for the past several years.
Nitromethane is
not being limited nor is it on allocation and from what we understand;
there are
no indications whatsoever that it will be.
Q. I heard that the fuel shortage had something to do with the
Olympic Games. Is this true?
A. No. The rumor that China wanted to clean the air in Beijing for the
Olympics
and shut down factories is true to a degree, but the factory that
produces the
nitromethane used in our proprietary fuels is not in Beijing and is not
affected.
Q. If there are no production problems or capacity problems with
nitromethane then why is there a sudden shortage of fuel?
A. Panic buying. The rumors which have led some to believe that there
would be
no hobby fuel available spread like wild fire causing panic buying and
hoarding of
fuel. Our own standard 8 to 10 week inventory of fuel was virtually gone
in a
matter of days as was our next re-stocking order. We literally went
through three
months of fuel inventory in less than two weeks. Until the supply chain
is fully
replenished which could take up to six weeks, there might be some on and
off
availability problems.
Q. If there is no nitro shortage, then why did you and everyone else
raise your prices on fuel at nearly the same time?
A. This would be a much more interesting story if this were about
international
intrigue, price fixing, collusion and price gouging, but it is not. The
truth is that
the cost to produce nitro fuel has been steadily increasing over the
past six
months and it has nothing to do with supply and demand and/or phantom
shortages.
Our bottler has not been passing all of these increases on to us
immediately and
we have not passed any of the increases on to you, our customers, until
just
recently. The cost of certain raw materials, methanol, propane and
sulfur that are
used to make nitromethane, are rapidly climbing. The price of sulfur
alone has
risen approximately five times in the last twelve months. Further
increases in raw
material costs such as plastic (for bottles) are a result of escalating
crude oil costs.
In addition, the factories are faced with a 17% loss due to the
elimination of
China’s export VAT rebates, an 18% loss due to the weakening of the
dollar and
increased freight costs due to higher oil prices. Currently we have no
guarantee
on our pricing and are being quoted pricing on a shipment-to-shipment
basis. We
expect nitro fuel prices will continue to increase, at least in the
short term.
Many of the other fuel vendors who were purchasing nitro in the US have
had to
re-source to the nitromethane producer located in China and also are
susceptible
to these price increases.
Just to add a few facts.
Angus, a daughter company of Dow Chemicals, who is one of the two Nitro manufacturers have decided to not supply NHRA with nitro methane anymore. At the same time, they have a statement on the homepage that clearly states that they would continue to supply NM to the hobby fuel producers.
Further, there is a company in the US who bought a huge stock pile of NM just before Angus stopped supplying the market and they are now holding the NM back, most likely to make a huge profit, once they’ll sell.
Dear Sirs
About …..
” Ken Cutler, Senior Vice President
Great Planes Model Distributors interview
Q. I heard that the fuel shortage had something to do with the
Olympic Games. Is this true?
A. No. The rumor that China wanted to clean the air in Beijing for the
Olympics
and shut down factories is true to a degree, but the factory that
produces the
nitromethane used in our proprietary fuels is not in Beijing and is not
affected.”
This is not correct.
I am the owner of JET’S Fuels from Italy and my production is about 2 Mil. of liters each year. I buy nitromethan of first grade of same quality of angus nitro, from China from many years, and the the real motiv for the nitro shortage is confirmed from our supplier that work on Shandong region. The govern obliged to stop the production of nitro for July and August months. Some factory continued a reduced production but the quantity is not sufficent for the market.
The prices are high only because there’s a speculation in act from china manufacturers too. In the last 2 months the quotation of the china nitrometane is increased of double. In the last year is increased almost of 3 time !!
However with a good order plan the JET’S never stopped any supply of fuel to his customers. We only reduced the sales of high nitro grade fuel for 15 days, but now we are able to continue regularly to supply our customers with a good nitro stock almost up end of September. We only will increase our prices of fuels of 5% from fisrt September, but this increase of price was planned still from January, because our pricelist was stop from 2 years. Any increase of price of fuels for the nitro shortage. We only planned a good order plan.
I apologize with all if my english language is not perfect
Best Regards
Mancinelli Elpidio
Owner of JET’S Fuels - Italy
EDUUU, estas Gordooo!