Asian biodiesel imports into EU continue amid transfer of duty risk

With EU imports of Asian biodiesel having been crimped in recent months by a probe into possible circumvention of duties, a Chinese company has provided a means for buyers to import T2 FAME from China without the risk of backdated duties, sources said.

"They are chartering vessels bringing T2 product into Europe, taking the risk of custom clearing, and distributing the product to European buyers, being a buffer for the potential anti-circumvention duties," one European producer said. "They are leaving the door open for imports, and this is very heavy on the market."

A trader said: "I know a firm has kept taking in products, provisioning the 18%." The Chinese company was not available for comment.

Throughout 2023, talk of advanced biodiesel imports from Asian flooding Europe has been the principal topic of discussion among market participants.

"The biggest impact has been the import of Chinese FAME, or FAME being classified as advanced. Jan-Feb, the alarm bells were ringing as we were having more than 100,000 mt per month of this material, which is 1 million mt on an annual basis, most of which coming in as advanced," a biofuels consultant said.

However, since the European Commission launched an anti-circumvention probe into imports of Indonesian biodiesel on Aug. 17, flows have fallen significantly.

"Many companies do not want to be involved in importing and custom clearing Chinese FAME, because they are afraid of retroactive anti-dumping/circumvention duties," a biodiesel producer said.

Background

EU imports of biodiesel from Indonesia are subject to an 8%-18% customs duty -- a countervailing duty -- to offset subsidies to producers from the Indonesian government.

On Aug. 17, the European commission launched as investigation into potential circumvention of the duty, prompted by concerns that product was being rerouted through China and the UK. The probe followed an initial request from the European Biodiesel Board, an association of producers.

According to the EU's official journal, the EBB's request "contains sufficient evidence that the existing countervailing measures on imports of the product concerned are being circumvented by imports of the product under investigation".

The EBB itself said Aug. 17 that "growing volumes of Indonesian biodiesel appear to be exported to China, and then re-exported towards Europe."

More recently, the World Trade Organization said late November its Dispute Settlement Body will review the countervailing duties imposed by the EU to ensure they were in line with WTO rules.

While there was little concrete information on when the EC investigation may conclude, one source said: "There is a deadline in which the commission must respond. It does not mean the process stops there. It is just one step in the process. They are expecting the end of Q1 2024 for the initial response."

Ripples in the market

"The price of UCOME has stayed quite low because of this [imports from Asia], and the market is oversupplied," a second trader said.

However, according to a third trader: "The volumes are limited and not enough to move the market. It puts pressure on prices, every ton imported does so. But I do not think a single company can be pointed out to create an oversupplied market."

As to why UCOME prices have remained low, the source said: "I assume it is probably a demand issue as well."

Platts, part of S&P Global Commodity Insights, last assessed UCOME (RED) FOB ARA's premium to ICE low sulfur gasoil futures at $457/mt on Nov. 30, down 35% in the past three months.

"Clearly the main reason for the [depressed market] is the vast influx of advanced FAME from Asia coming from China. Whether it originated from China is another matter," the consultant said.

"European FAME producers in February/March were really hurting, but they thought the hurt to be temporary and expected the ISCC or European Commission to put a stop to it, subsequently restoring the margin."

"We are at least nine months into the problem and the margins have not recovered. A lot of producers in Europe are wondering how long they can last at this level. It is a worrying situation."