China’s Biodiesel Producers Seek 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 exploring producing other biofuels as supply to the European Union, their biggest purchaser, dries up ahead of anti-dumping tariffs, biofuel executives and analysts said.

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

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

Exports to the bloc have fallen greatly considering that mid-2023 amid examinations. Volumes in the very first 6 months of this year plunged 51% from a year earlier to 567,440 heaps, Chinese customs information showed.

June deliveries diminished to simply over 50,000 tons, the most affordable since mid-2019, according to customs information.

At their peak, exports to the EU reached a record 1.8 million tons in 2023, 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 customs figures showed.

Chinese producers of biodiesel have taken pleasure in fat revenues in current years, maximizing the EU’s green energy policy that gives subsidies 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 items.

However, the boom was temporary. The EU started in August last year examining 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 believed to be priced artificially low and undercutting local manufacturers.

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

“With substantial costs of UCO partially supported by strong U.S. and European demand, and free-falling item costs, companies are having a difficult time making it through,” said Gary Shan, chief marketing officer of Henan Junheng.

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

With low rates, biodiesel plants have cut their operations to a lowest level of under 20% of existing capacity 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 analysts predict 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 tons, with the United States, Singapore and the Netherlands the leading destinations.

OUTLETS

While many smaller sized plants are likely to shutter production forever, bigger manufacturers like Zhejiang Jiaao, Leoking Enviro Group and Longyan Zhuoyue are checking out new outlets including the marine fuel market in the house and in the important 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 utilize more biodiesel in marine fuel.

Companies would also accelerate planning and structure of sustainable air travel fuel (SAF) plants, executives said. China is expected to reveal an SAF mandate before the end of 2024.

They have actually also been searching for 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)