China s Biodiesel Producers Seek New Outlets As Hefty EU Tariffs Bite

By Chen Aizhu


SINGAPORE, Aug 16 (Reuters) - Chinese biodiesel manufacturers are seeking new outlets in Asia for their exports and exploring producing other biofuels as supply to the European Union, their most significant purchaser, dries up ahead of anti-dumping tariffs, biofuel executives and analysts stated.


The EU will impose provisionary anti-dumping duties of between 12.8% and 36.4% on Chinese biodiesel from Friday, striking over 40 business including leading producers Zhejiang Jiaao, Henan Junheng and Longyan Zhuoyue Group in an export organization that was worth $2.3 billion last year.


Some bigger producers are considering the marine fuel market in China and Singapore, the world's leading marine fuel center, as they look for to offset currently falling biodiesel exports to the EU, biofuel executives said.


Exports to the bloc have actually fallen sharply given that mid-2023 in the middle of examinations. Volumes in the very first 6 months of this year plunged 51% from a year earlier to 567,440 heaps, Chinese custom-mades data showed.


June shipments shrank to just over 50,000 heaps, the most affordable since mid-2019, according to customs data.


At their peak, exports to the EU reached a record 1.8 million loads in 2023, representing 90% of all Chinese biodiesel exports that year. The Netherlands was the leading importer in 2023, taking in 84% of China's biodiesel shipments to the EU, followed by Belgium and Spain, Chinese customizeds figures revealed.


Chinese producers of biodiesel have actually taken pleasure in fat earnings in the last few years, maximizing the EU's green energy policy that grants subsidies to business that are utilizing biodiesel as a sustainable transportation fuel such as Repsol, Shell and Neste.


Many of China's biodiesel manufacturers are privately-run small plants employing scores of employees processing waste oil gathered from millions of Chinese restaurants. Before the biodiesel export boom, they were making lower-value items like soaps and processing leather products.


However, the boom was short-lived. The EU started in August in 2015 examining Indonesian biodiesel that was suspected of circumventing duties by going through China and Britain, followed by a 14-month anti-dumping probe into Chinese biodiesel thought to be priced artificially low and damaging local producers.


Anticipating the tariffs, traders equipped up on used cooking oil (UCO), raising prices of the feedstock, while costs of biodiesel sank in view of shrinking demand for the Chinese supply.


"With significant costs of UCO partly supported by strong U.S. and European need, and free-falling product costs, companies are having a bumpy ride enduring," stated Gary Shan, chief marketing officer of Henan Junheng.


Prices of hydrotreated veggie oil, or HVO, a primary kind of biodiesel, have halved versus last year's average to the existing $1,200 to $1,300 per metric lot and are off a peak of $3,000 in 2022, Shan included.


With low rates, biodiesel plants have actually cut their operations to an all-time low of under 20% of existing capability typically in July, below a peak of 50% last seen in early 2023, according to Chinese consultancies Sublime China Information and JLC.


Meanwhile, shrinking biodiesel sales are improving China's UCO exports, which analysts anticipate are set to touch a new high this year. UCO exports soared by two-thirds year-on-year in the first half of 2024 to 1.41 million heaps, with the United States, Singapore and the Netherlands the leading locations.


OUTLETS


While lots of smaller sized plants are most likely to shutter production indefinitely, larger manufacturers like Zhejiang Jiaao, Leoking Enviro Group and Longyan Zhuoyue are exploring brand-new outlets including the marine fuel market at home and in the essential hub of Singapore, which is using more biodiesel for ship fuel mixing, according to the biofuel executives.


Among the manufacturers, Longyan Zhuoyue, agreed in January with COSCO Shipping to use more biodiesel in marine fuel.


Companies would also accelerate preparation and building of sustainable aviation fuel (SAF) plants, executives said. China is expected to reveal an SAF mandate before completion of 2024.


They have likewise been scouting for new biodiesel customers outside the EU bloc, in Australia, Japan, South Korea and Southeast Asia where there are local requireds for the alternative fuel, the added.


(Reporting by Chen Aizhu; Editing by Ana Nicolaci da Costa)