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 exploring producing other biofuels as supply to the European Union, their most significant buyer, dries up ahead of anti-dumping tariffs, biofuel executives and experts said.

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

Some bigger manufacturers are eyeing the marine fuel market in China and Singapore, the world's leading marine fuel hub, as they seek to offset currently falling biodiesel exports to the EU, biofuel executives stated.

Exports to the bloc have actually fallen dramatically considering that mid-2023 amid investigations. Volumes in the first 6 months of this year plunged 51% from a year earlier to 567,440 tons, Chinese custom-mades data revealed.

June shipments diminished to simply over 50,000 loads, the most affordable since mid-2019, according to customizeds information.

At their peak, exports to the EU reached a record 1.8 million heaps 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 deliveries to the EU, followed by Belgium and Spain, Chinese customizeds figures revealed.

Chinese manufacturers of biodiesel have actually enjoyed fat profits over the last few years, taking advantage of the EU's green energy policy that gives aids to business that are utilizing biodiesel as a sustainable transport fuel such as Repsol, Shell and Neste.

A lot of China's biodiesel producers are privately-run little plants using scores of workers processing waste oil collected from millions of Chinese dining establishments. Before the biodiesel export boom, they were making lower-value goods like soaps and processing leather products.

However, the boom was temporary. The EU started in August in 2015 investigating Indonesian biodiesel that was presumed of preventing tasks by going through China and Britain, followed by a 14-month anti-dumping probe into Chinese biodiesel thought to be priced artificially low and undercutting regional producers.

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

"With hefty rates of UCO partly supported by strong U.S. and European demand, and free-falling item prices, business are having a difficult time making it through," said Gary Shan, chief marketing officer of Henan Junheng.

Prices of hydrotreated grease, or HVO, a main type of biodiesel, have cut in half versus in 2015's average to the existing $1,200 to $1,300 per metric load and are off a peak of $3,000 in 2022, Shan included.

With low prices, 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 boosting China's UCO exports, which analysts forecast are set to touch a new high this year. UCO exports soared 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 destinations.

OUTLETS

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

One of the producers, Longyan Zhuoyue, agreed in January with COSCO Shipping to utilize more biodiesel in marine fuel.

Companies would likewise accelerate planning and building of sustainable aviation fuel (SAF) plants, executives stated. China is anticipated to reveal an SAF mandate before the end of 2024.

They have actually likewise been hunting for brand-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 authorities included.