Potential biodiesel Europe-US trade flow if antidumping continues: sources

06.09.2017

A potential new trade flow from Europe to the US could emerge in the biodiesel markets, should antidumping duties be imposed on product from Argentina and Indonesia by the US, and remain in place from Europe, according to Europe-based market sources.

According to the NBB, importers will be required to pay cash deposits ranging from 50.29% to 64.17% for biodiesel from Argentina and 41.06% to 68.28% for biodiesel from Indonesia. This has the potential to alter the current flows from Argentina and Indonesia into the US, which are largely keeping US blending mandates afloat. Through July, over 20% of biodiesel (D4) RINs generated were from imports, according to US Environmental Protection Agency data.

Should a situation arise where antidumping duties are in place against Indonesian and Argentinian biodiesel imports by both the US and Europe, there could be the potential for a new trade flow opening from Europe into the US in order to satisfy blending obligations there.

"Biodiesel in Europe could move into the US if antidumping duties aren't cut in Europe and they are imposed on Argentine imports into the US," a source said Tuesday.

The decision whether to cut antidumping duties in Europe is expected Thursday, having been postponed from July 27.

Typically biodiesel in Europe has higher GHG savings than that from the US and so could command a greater premium than imports from Argentina and Indonesia; however, this could still prove attractive for producers, should the price of biodiesel in Europe fall far enough.

S&P Global Platts assessed FAME 0 at $917.75/mt FOB ARA Monday, a four-month low, while the premium for FAME 0 over front-month ICE gasoil futures hit a near 19-month low due to bullish gasoil associated with logistical issues stemming from Hurricane Harvey in the Gulf of Mexico.

But ongoing uncertainty around the $1/gal US biodiesel tax credit that expired at the beginning of the year could hamper efforts from European sellers to enter the US market.

Historically, biodiesel blenders in the US have enjoyed a $1/gal tax credit that boosted blending economics for the biofuel. But the credit is not currently in place and if it does return, which many US market participants see as likely, it could take on a different form.

US producers have called for the credit to move from blenders to producers. As a blenders' tax credit imports can look up to $1/gal more attractive but as a producers' tax credit only US-produced biodiesel would receive the boost from the credit.

"If the tax credit in the US moves to producers, there could be limited incentives for product to be used in the US," a European trader said Tuesday.

With ongoing uncertainty in Europe over the proposed cuts to antidumping duties, liquidity has continued to wane and the differential between RME and FAME 0 has hit its widest level in 20 months at $121.25/mt, with RME supported by bullish vegoils, and FAME 0 falling on bullish supply expectations.

"Supply concerns are leaving FAME 0 low -- there could be a huge amount of product," a source said Tuesday.

Despite this expected increased supply, the European market is split in its views as to the extent of these imports.

"There should be some imports in the New Year but not before then -- you can't blend it if it's cold, at least not in large quantities," said another source, anticipating increased imports in 2018 should antidumping duties be cut, rather than in the remainder of 2017. This comes as both palm- and soybean-derived biodiesel, typically from Indonesia and Argentina respectively, have less preferential cold weather properties than the largely European-produced RME.

As such, in order to blend a product that could still be used during the cooler winter months in Europe, smaller quantities of SME and PME would need to be blended in order for the product to still be used in Europe.

As a result of the need for biodiesel with preferential cold weather properties in Europe during winter, the RME-FAME 0 differential tends to widen in the winter months, leaving FAME 0 at a significant discount to RME. This could make it attractive to blenders in the US, thus increasing demand and potentially facilitating increased imports of palm oil and soybean oil for esterification into Europe throughout the winter months.


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