Groups take predictable sides as US biodiesel trade war develops
Just hours after the National Biodiesel Board filed an antidumping and countervailing duty petition March 23 with the U.S. Department of Commerce and the U.S. International Trade Commission, claiming Argentine and Indonesian companies violate trade laws by flooding the U.S. market with dumped, subsidized biodiesel, other groups began taking sides in the global sector’s latest biodiesel trade war.
“After Peruvians did the same a few months ago, the U.S. market’s recourse to a legal solution clearly shows that the unfair trade imbalances caused by the Argentineans and Indonesian producers are impossible to cope with and pose a severe threat to the global biodiesel market’s level playing field,” said Raffaello Garofalo, secretary general of the European Biodiesel Board. “Most importantly, we hope the news will also send a strong signal to EU authorities about the undeniably legitimate character of the EU trade defense measures in place for biodiesel against Indonesia and Argentina.”
Last year, Peru imposed antidumping and countervailing duties on Argentine biodiesel, and in late 2013 the EU did the same against Argentina and Indonesia, resulting in 41.9 to 49.2 percent duties on Argentina and 8.8 to 23.3 percent duties on Indonesia. In 2010, the EU imposed duties on U.S. biodiesel, which were subsequently extended.
“The unfair trade practices resulting especially from the differential export taxes (DETs) in place both in Argentina and Indonesia have caused serious economic damage that has been challenged and condemned not only in the EU, but equally in Peru,” the EBB stated. “Today, time has come for the NBB to denounce and disrupt the illegal trade patterns.”
Countries such as Argentina and Indonesia encourage exportation of finished biodiesel from soy and palm oils, respectively, with DETs, through which decreased export tax rates are applied to various stages of the oilseed value chain. These tax schemes are designed to incentivize domestic manufacturing whereby the economic benefits associated with value-added production are retained in-country. According to a Global Agricultural Information Network report by USDA’s Foreign Agricultural Service, titled, “Argentina Biofuels Annual 2016,” in June 2016, the Argentine government taxed exports of biodiesel at 5.04 percent while whole soybean exports were taxed at 30 percent and soybean oil at 27 percent. Heather Zhang, an analyst with Prima Markets, said Argentina’s biodiesel export tax ranged from a low of 1.62 percent to a high of 7.15 percent last year.
“Customers who chose to use internationally sourced biodiesel for transportation fuels or heating oil are significantly impacted by this petition, particularly in the Northeast Corridor,” said Michael McAdams, president of the Advanced Biofuels Association (ABFA). “This piggybacks on NBB’s efforts to change the existing blenders tax credit to a production credit. Both of these actions will have the effect of raising the cost of biodiesel to those selling the fuels to American drivers, while further lining the pockets of those who grow soybeans in the United States. These actions by a few large U.S. producers and U.S. soybean growers puts the entire renewable volume obligations (RVO) system at risk, as the current Renewable Fuel Standard program depends on security of supply from foreign markets to ensure the 2-billion-gallon mandate can be achieved.”
U.S. biodiesel production tallies for the month of December provided by the U.S. Energy Information Administration, which are collected via a survey method and are typically conservative, show 143 million gallons of biodiesel was produced in December. Annualized, this represents nearly 1.72 billion gallons. EIA’s actual reported total U.S. biodiesel production volume for 2016 comes in at 1.57 billion gallons. U.S. EPA’s EMTS data for domestic production volumes based on D4 RIN generation, which include biodiesel and renewable diesel, show the U.S. manufactured 1.9 billion gallons last year.
EIA’s own figures indicate 2.3 billion gallons of U.S. biodiesel productive capacity, so in context of annualizing its reported December volumes, there would still be roughly 25 percent idled capacity. In context of EIA’s reported annual domestic biodiesel production volumes, idled U.S. capacity last year was 32 percent.
EIA’s U.S. biodiesel production data do not include renewable diesel, which, upon completion of Diamond Green Diesel’s expansion in Louisiana, coupled with REG Geismar’s productive capacity, would add 350 MMgy. Moreover, many other U.S. biodiesel production facilities are undergoing expansions, and a new 30 MMgy soy biodiesel plant is slated for construction in North Dakota, further adding to the U.S. industry’s productive capacity.
The U.S. imported a total of nearly 693 million gallons of biodiesel last year, according to EIA data. In addition, the U.S. imported 223 million gallons of renewable diesel. While Argentine and Indonesian biodiesel make up a majority of U.S. imports, if they suddenly ceased but biodiesel imports from Canada, Germany, Korea and Australia, along with renewable diesel imports from Singapore, remained at 2016 volumes, the U.S. would still import roughly 370 million gallons of biomass-based diesel.
McAdams said ABFA members vehemently oppose the petition to levy duties on Argentine and Indonesian biodiesel. ABFA members include multinational commodities entities and biodiesel producers operating in Argentina, Indonesia and the U.S., such as Louis Dreyfus Co. and Wilmar, and consignees of U.S. imports including Louis Dreyfus, Wilmar, Targray and Musket Corp., which is affiliated with major consignee Biosphere Fuels LLC through Love’s Travel Stops.
According to data Genscape Inc. shared with Biodiesel Magazine, last year Biosphere received 47 shipments of biodiesel into the U.S. from Argentina totaling 145 million gallons, and 14 shipments from Indonesia totaling 33 million gallons. Louis Dreyfus brought in nine shipments into the U.S. from Argentina last year totaling 26 million gallons. Wilmar took 22 shipments of palm biodiesel into the U.S. from Indonesia in 2016 totaling 47 million gallons. Targray was the consignee for eight shipments of Indonesian biodiesel into the U.S. last year totaling 16 million gallons, along with deliveries from Argentina as well.
Louis Dreyfus and Targray are also members of the NBB. “NBB is unique in its representation of the entire market sector,” NBB Communications Director Jessica Robinson told Biodiesel Magazine. “Unlike other groups, which, for example, may only represent large import interests, our members reflect the entire American biodiesel supply. In rare cases where interests do not intersect and a small group may carry a differing view, we welcome the discussion and are better positioned to meet consumer needs as a result. Imports, specifically from Argentina and Indonesia, have skirted fair competition to increase over 400 percent. We are talking about product used in the U.S. It’s only right that products made here should get the chance to show up to a fair competition.”
Another ABFA member is Neste Corp., which exported 223 million gallons of renewable diesel to the U.S. in 2016, according to EIA data, most of which arrived and was used in California where it was eligible for the federal blenders tax, RIN and LCFS credits.
“The National Biodiesel Board and U.S. biodiesel industry are committed to fair trade, and we support the right of producers and workers to compete on a level playing field,” said Donnell Rehagen, CEO of the NBB. “This is a simple case where companies in Argentina and Indonesia are getting advantages that cheat U.S. trade laws and are counter to fair competition. NBB is involved because U.S. biodiesel production, which currently supports more than 50,000 American jobs, is being put at risk by unfair market practices.”
Biodiesel imports from Argentina and Indonesia surged by 464 percent from 2014 to 2016, according to NBB. “That growth has taken 18.3 percentage points of market share from U.S. manufacturers,” the organization stated.
Argentina alone exported 129 million more gallons of biodiesel to the U.S. in 2016 than what the U.S. industry produced in 2010. Last year, U.S. ports received approximately 444 million gallons of Argentine biodiesel, according to EIA data. This is 64 million gallons more than what Argentina shipped to the U.S. in the previous three years combined. Argentine biodiesel represents the single largest source of imported biodiesel, accounting for 64 percent of biodiesel imports and more than 48 percent of combined U.S. biodiesel and renewable diesel imports.
U.S. biodiesel imports from Indonesia are also steadily climbing. In 2016, Indonesia exported roughly 102 million gallons of biodiesel to the U.S., according to EIA data, nearly twice as much as in 2013 (52.4 million gallons). Based on the huge palm industry in Indonesia and the players involved, most experts assume all the biodiesel entering the U.S. from Indonesia is palm-based product generating D6 RINs.
“The resulting imbalance caused by unfair trade practices is suffocating U.S. biodiesel producers,” Rehagen said. “Our goal is to create a level playing field to give markets, consumers and retailers access to the benefits of true and fair competition.”
NBB stated that, based on its review, Argentine and Indonesian producers are dumping their biodiesel in the U.S. by selling at prices that are substantially below their costs of production, reflected in the petition’s alleged dumping margins of 23.3 percent for Argentina and 34 percent for Indonesia. The petition also alleges illegal subsidies based on numerous government programs in those countries, including DETs.
Louis Dreyfus told Biodiesel Magazine that the company was unable to comment at this time.