With the implementation of the European Union’s temporary anti-dumping duties on Chinese biodiesel, exports of biodiesel from China to Europe have significantly declined. Industry analysts indicate that Chinese biodiesel manufacturers are now seeking new opportunities in Asia and exploring the development of other biofuels.
According to reports from Reuters, starting from Friday (August 17), the EU began imposing temporary anti-dumping duties ranging from 12.8% to 36.4% on Chinese biodiesel (biofuel) to counteract dumping practices by over 40 Chinese enterprises, including Zhejiang Jiaoao Environmental Protection, Henan Junheng Bio and Longyan Zhuoyue New Energy Group.
Executives in the biofuel industry have revealed that some large-scale producers are closely eyeing both the domestic market in China and the world’s top marine fuel hub in Singapore to address the overcapacity issue resulting from the steep drop in exports to Europe.
Since the second half of 2023, Chinese biodiesel exports to the EU have sharply decreased due to the EU’s anti-dumping investigation. Customs data from China shows that the export volume in the first six months of this year plummeted by 51% compared to the previous year, falling to 567,440 tons.
The shipment volume in June this year dropped to just over 50,000 tons, marking the lowest figure since the second half of 2019.
During the peak period in 2023, China’s biodiesel exports to the EU reached a record high of 1.8 million tons, accounting for 90% of that year’s total biodiesel exports from China.
Among them, the Netherlands was the largest importer, accounting for 84% of China’s biodiesel exports to the EU, followed by Belgium and Spain.
In recent years, Chinese biodiesel producers have reaped substantial profits by leveraging the EU’s green energy policies. Under this policy, the EU provides subsidies to companies like Repsol, Shell, and Neste, which use biodiesel as sustainable transportation fuel.
Many of China’s biodiesel producers are privately-owned small factories that typically employ only a few dozen workers and process waste oil collected from millions of Chinese restaurants. Before the biodiesel export boom, they mainly engaged in the production of low-cost products like soap and leather goods.
However, the windfall from biodiesel exports proved to be short-lived. Last August, the EU initiated an investigation into Indonesian biodiesel suspected of tariff evasion through China and the UK, followed by a 14-month anti-dumping investigation into Chinese biodiesel.
It is believed that the underpricing of Chinese biodiesel suppressed local producers’ prices.
Anticipating increased tariffs, traders stockpiled used cooking oil, driving up raw material prices, while the export prices of biodiesel declined due to reduced demand from China.
Gary Shan, Chief Marketing Officer of Henan Junheng, stated, “Strong demand from the US and Europe has partly supported the high prices of used cooking oil, but now product prices are plummeting, putting companies in dire straits.”
He further added that the pricing of Hydrotreated Vegetable Oil (HVO), a major type of biodiesel, dropped by half from an average of $3,000 per ton in the peak of 2022 to $1,200 to $1,300 last year.
According to analysis data from Sublime China Information, due to the sharp price decline, Chinese biodiesel factories reduced their production capacity by 20% in July this year, representing only 50% of the peak capacity at the beginning of 2023.
Simultaneously, the contraction in biodiesel sales has propelled China’s Used Cooking Oil (UCO) exports, with analysts predicting a record high export volume this year.
In the first half of 2024, China’s UCO exports surged by two-thirds compared to the previous year, reaching 1.41 million tons, with major destinations being the US, Singapore, and the Netherlands.
Although many small biodiesel factories may face indefinite shutdowns, executives in the biofuel industry have disclosed that large producers like Zhejiang Jiaoao Environmental Protection, Anhui Lejin Environmental, and Longyan Zhuoyue New Energy Group are exploring new avenues, including the domestic marine fuel market and Singapore as a pivotal hub.
Among these producers, Longyan Zhuoyue New Energy Group reached an agreement with China COSCO Shipping in January this year to incorporate more biodiesel into marine fuels.
Executives also mentioned that these large companies are expediting the planning and construction of Sustainable Aviation Fuel (SAF) facilities. It is expected that China will announce regulations on Sustainable Aviation Fuel (SAF) by the end of 2024.
These officials highlighted that they have been actively seeking new biodiesel customers outside the EU, such as Australia, Japan, South Korea, and Southeast Asia, where regulations mandate the use of alternative fuels.