BIOFUELS company D1 Oils yesterday said its Teesside refinery was still running below capacity as the sector continues to face several short-term challenges.

The Middlesbrough-based plc said the industry remains "immature" and trading has been affected by high feedstock prices coupled with subsidised biodiesel imports from the US.

Due to the market conditions, D1 reported a pre-tax loss of £10.3m in the six months to June 30, compared to £4.79m in the same period last year. Turnover climbed from £32,000 to £4.1m.

D1 has a refinery in Middlesbrough, with the capacity to produce 42,000 tonnes of biodiesel, and a second site in Bromborough, Merseyside, which, when fully operational, will produce 100,000 tonnes of green fuel.

However, the company yesterday said it had slowed the timetable for commissioning the first 50,000 tonnes of capacity at its Bromborough refinery from the end of this year to the first half of next year.

It also said it would not increase its total UK refining capacity from 142,000 tonnes to 320,000 tonnes by the end of next year, as previously stated.

D1 said it is increasingly difficult to refine biodiesel from edible vegetable oils profitably in Europe without significant subsidies.

Not only are feedstock prices increasing, but producers of biodiesel in the US are currently eligible for two subsidies when entering the EU market.

"As a result, this material is setting market prices in the EU and refinery margins are substantially eroded," a D1 spokesman said.

"We are working with industry groups to assist the UK and EU authorities in taking the necessary measures to end the eligibility of US imports for double taxation relief. Unless the taxation 'double-dip' issue is addressed, we believe it will be difficult for the EU to develop a robust biodiesel refinery industry."

However, D1 said its long-term prospects remain promising, as its programme of planting jatropha - an inedible oil crop - progresses well. Production of jatropha oil for refining into biodiesel is expected to begin next year.

Earlier in the summer, D1 established a global joint venture with oil company BP. The 50-50 venture, named D1-BP Fuel Crops, will begin operations on Monday and accelerate the planting of jatropha crops on a massive scale.

BP and D1 Oils will invest £80m in the project during the next five years and one million hectares of jatropha - a drought-resistant tree that produces inedible oilseed used to make biodiesel - will be grown in South-East Asia, southern Africa, central and South America, and India.

Elliott Mannis, D1 chief executive, said: "Although the biodiesel industry in Europe faces the short-term challenges of higher feedstock prices and inconsistent subsidy regimes, our strategy of focusing on sustainable, low-cost, long-term supplies of inedible feedstocks is on track and is the right way forward both for the company and the industry."

D1 Oils has appointed Christopher Tawney as group finance director. He joins from WBB Minerals, part of Belgium's Sibelco Group, one of the world's largest providers of industrial minerals. Moira Black has been appointed non-executive director