China's Biodiesel Producers Seek Brand-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 checking out producing other biofuels as supply to the European Union, their most significant purchaser, dries up ahead of anti-dumping tariffs, biofuel executives and experts said.

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

Some larger producers are considering the marine fuel market in China and Singapore, the world's leading marine fuel center, as they seek to offset already 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 previously to 567,440 tons, Chinese custom-mades information showed.

June shipments diminished to simply over 50,000 tons, the most affordable given that mid-2019, according to customs information.

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

Chinese producers of biodiesel have taken pleasure in fat profits recently, maximizing the EU's green energy policy that gives subsidies to companies that are using biodiesel as a sustainable transport fuel such as Repsol, Shell and Neste.

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

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

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

"With significant rates of UCO partly supported by strong U.S. and European demand, and free-falling item 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 main kind of biodiesel, have actually cut in half versus in 2015's average to the present $1,200 to $1,300 per metric lot and are off a peak of $3,000 in 2022, Shan added.

With low costs, biodiesel plants have cut their operations to an all-time low 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, diminishing biodiesel sales are enhancing China's UCO exports, which analysts forecast 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 heaps, with the United States, Singapore and the Netherlands the leading destinations.

OUTLETS

While numerous smaller plants are most likely to shutter production forever, larger manufacturers like Zhejiang Jiaao, Leoking Enviro Group and Longyan Zhuoyue are checking out brand-new outlets consisting of the marine fuel market at home and in the essential hub of Singapore, which is using more biodiesel for ship fuel blending, 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 speed up planning and building of sustainable air travel fuel (SAF) plants, executives said. China is anticipated to announce an SAF required before the end of 2024.

They have actually also been scouting for new biodiesel customers outside the EU bloc, in Australia, Japan, South Korea and Southeast Asia where there are regional mandates for the alternative fuel, the authorities added.