Supply Chain
Biodiesel - Secured access to abundant, diversified, and low-cost feedstock
We have access to a stable and diversified source of biodiesel raw materials. In addition to non-edible seed oil, we use waste cooking oil and vegetable oil residue as raw material for biodiesel production. We were awarded three patents for biodiesel production processes that enable us to use multiple sources of raw materials interchangeably. We have submitted eight additional patent applications, of which six have passed the preliminary examination, and two have been accepted for review. We maintain a flexible procurement model to minimize our raw material costs.
We are strategically located in Shaanxi Province in the northwestern region of China, an area especially suitable for planting non-edible oil plants such as Chinese prickly ash, cornel and Chinese pistache. The local farmers in Shaanxi have planted enough raw materials to produce over 430,000 tons of biodiesel. We have signed raw material purchasing contracts with local agricultural associations that organize farmers to harvest and deliver the seed oil to us. These contracts obligate most of the associations to first offer to sell the feedstock to us. The Shaanxi Provincial Government plans to permit additional forestlands to be used solely for the planting of non-edible oil plants. The abundant current and future supply of feedstock available is sufficient for our needs, and should meet demands for raw materials when we increase our production capacity as planned.
We also have secured access to vegetable oil residue and waste cooking oil through annual contracts with vegetable oil factories and waste cooking oil collecting centers.
Wholesale Distribution and Retail Gas Stations - Established relationships with suppliers and customers
We have been operating in the wholesale distribution of finished oil and heavy oil since 1999, and have established strong relationships with our suppliers and customers. Our largest supplier, Shaanxi Yanchang Group, is the fourth largest oil company in China and has over ten million tons of refinery capacity. We have a long-standing relationship with them which includes establishing supply and purchasing stations with their three oil refineries.
We focus on customer satisfaction and have consistently delivered high quality products and services to our customers. We have an excellent reputation and are able to maintain long-term relationships with our customers, as evidenced by our retention rate. We have an increasing number of new customers. The number of customers in our wholesale distribution of finished oil and heavy oil business segment has grown from 936 in 2008 to 1,180 in 2009. Our sales volume has also increased significantly over the past three years.
Our suppliers and customers prefer to work with us for the following reasons:
- We are an established player with a large-scale operation and stable supply.
- We have a strong financial position and provide flexibility in payment terms.
- We have a professional purchase and sales team, who are responsive to suppliers’ and customers’ needs.