China's Biodiesel Producers Seek new Outlets As Hefty EU Tariffs Bite

By Chen Aizhu

SINGAPORE, Aug 16 (Reuters) - Chinese biodiesel manufacturers are looking for 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 stated.

The EU will enforce provisionary anti-dumping tasks of in 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 service 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 balance out currently falling biodiesel exports to the EU, biofuel executives said.

Exports to the bloc have actually fallen sharply considering that mid-2023 amid investigations. Volumes in the first six months of this year plunged 51% from a year earlier to 567,440 lots, Chinese customs data revealed.

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

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, taking in 84% of China's biodiesel shipments to the EU, followed by Belgium and Spain, Chinese customizeds figures showed.

Chinese manufacturers of biodiesel have enjoyed fat revenues in current years, taking advantage of the EU's green energy policy that gives aids to companies that are utilizing biodiesel as a sustainable transportation fuel such as Repsol, Shell and Neste.

A number of China's biodiesel manufacturers are privately-run small plants employing ratings of employees 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 short-term. The EU started in August in 2015 investigating Indonesian biodiesel that was presumed of preventing responsibilities 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 manufacturers.

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

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

Prices of hydrotreated vegetable oil, or HVO, a main type of biodiesel, have cut in half 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 added.

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

Meanwhile, diminishing biodiesel sales are improving China's UCO exports, which experts forecast are set to touch a brand-new high this year. UCO exports soared 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 top locations.

OUTLETS

While many smaller plants are likely to shutter production indefinitely, bigger manufacturers 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 important center 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 likewise accelerate planning and structure of sustainable air travel fuel (SAF) plants, executives said. China is expected to announce an SAF required before the end of 2024.

They have actually likewise been searching for new biodiesel clients outside the EU bloc, in Australia, Japan, South Korea and Southeast Asia where there are regional mandates for the alternative fuel, the authorities included.