China’s Biodiesel Producers Seek Brand-new Outlets As Hefty EU Tariffs Bite

By Chen Aizhu

SINGAPORE, Aug 16 (Reuters) – Chinese biodiesel producers are seeking brand-new outlets in Asia for their exports and checking out producing other biofuels as supply to the European Union, their biggest buyer, dries up ahead of anti-dumping tariffs, biofuel executives and analysts said.

The EU will enforce provisional anti-dumping duties of between 12.8% and 36.4% on Chinese biodiesel from Friday, hitting over 40 companies consisting of leading producers Zhejiang Jiaao, Henan Junheng and Longyan Zhuoyue Group in an export business that was worth $2.3 billion in 2015.

Some bigger manufacturers are considering the marine fuel market in China and Singapore, the world’s top marine fuel hub, as they seek to balance out currently falling biodiesel exports to the EU, biofuel executives stated.

Exports to the bloc have actually fallen sharply since mid-2023 amid investigations. Volumes in the very first 6 months of this year plunged 51% from a year previously to 567,440 lots, Chinese custom-mades data showed.

June deliveries shrank to simply over 50,000 heaps, the most affordable considering that 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, soaking in 84% of China’s biodiesel deliveries to the EU, followed by Belgium and Spain, Chinese custom-mades figures revealed.

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

A lot of China’s biodiesel manufacturers are privately-run small plants using scores of workers processing waste oil collected from millions of Chinese restaurants. Before the biodiesel export boom, they were making lower-value items like soaps and processing leather items.

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

Anticipating the tariffs, traders stockpiled on utilized cooking oil (UCO), raising costs of the feedstock, while costs of biodiesel sank in view of diminishing demand for the Chinese supply.

“With hefty costs of UCO partly supported by strong U.S. and European demand, and free-falling item costs, companies are having a hard time surviving,” stated Gary Shan, chief marketing officer of Henan Junheng.

Prices of hydrotreated grease, or HVO, a main type of biodiesel, have actually halved versus in 2015’s average to the current $1,200 to $1,300 per metric load and are off a peak of $3,000 in 2022, Shan added.

With low costs, biodiesel plants have cut their operations to a lowest level of under 20% of existing capability on average in July, down from a peak of 50% last seen in early 2023, according to Chinese consultancies Sublime China Information and JLC.

Meanwhile, shrinking biodiesel sales are boosting China’s UCO exports, which experts predict are set to touch a brand-new high this year. UCO exports skyrocketed by two-thirds year-on-year in the very first half of 2024 to 1.41 million lots, with the United States, Singapore and the Netherlands the leading locations.

OUTLETS

While lots of smaller plants are likely to shutter production forever, larger producers like Jiaao, Leoking Enviro Group and Longyan Zhuoyue are checking out brand-new outlets including the marine fuel market in the house and in the essential center of Singapore, which is utilizing more biodiesel for ship fuel mixing, according to the biofuel executives.

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

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

They have also been hunting for brand-new biodiesel clients outside the EU bloc, in Australia, Japan, South Korea and Southeast Asia where there are local mandates for the alternative fuel, the officials included.

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