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rgentina is traditionally a major supplier of biodiesel to the European Union (EU) market, but trade flows have reduced sharply in the past year and could fall further with an antidumping duty soon expected. An additional antisubsidy countervailing duty may also be imposed on the Southern Cone nation. The unusual imposition of parallel protective duties follows a European Commission (EC) probe of the Argentine government, which it says forces the countrys feedstock producers to sell to domestic biodiesel manufacturers. The result is a glut of Argentine biodiesel, pushing producers to dump cut-priced product on the EU market. Parallel duties are likely to be imposed on Indonesian exports for the same reason. An EC note explains: In both countries concerned an export tax is charged on the raw material, at rates which are higher than those charged on the export of biodiesel. This approach effectively obliges the producers of the raw material to sell on the domestic market, thus depressing prices and artificially reducing the costs of the biodiesel producers. As a result, the EC is expected to impose provisional anti-dumping duties on Argentine biodiesel exports. Brussels insisted in January that national customs organisations register every imported consignment from Argentina. This is unusual and would allow the EC to retroactively levy the tariff on Argentine exporters. Raffaello Garofalo, secretary general of the European Biodiesel Board (EBB), says the decision indicated the EC had gathered sufficient proof to justify a duty: We hope this will be the first right move to put an end to an unacceptable situation whereby our industry has been heavily injured by unfair imports for too long, he adds. In April, the EC in effect warned EU customs authorities that the registration of imports might also be used to apply retroactive countervailing duties. This, too, is welcomed by Garofalo, who says: Biodiesel is a cornerstone for Europes green economy, guaranteeing sustainable alternatives to fossil fuels, while also supporting European employment for up to a hundred thousand of EU jobs. The EBB lodged its complaint with the EC last July. The EC said the EBB included evidence that Argentine biodiesel exports had increased both in absolute terms and in market share, depressing EU biodiesel prices and causing substantial adverse effects on the overall performance and the financial situation of the EU industry. The EU action has been unpopular in Argentina, with exports falling sharply on the

ARGENTINAS BIODIESEL PRODUCERS DENY THE EUROPEAN COMMISSIONS DUMPING CHARGES

announcement of an EC enquiry last August and major companies such as Molinos in Santa Fe province reportedly halting production. Molinos runs Argentinas largest biodiesel plant, which has a capacity of 480,000 tonnes/year.

Exports and production suffering

Argentinas biodiesel exports (worldwide) totalled 226,000 tonnes for the first three months of 2013, nearly 50% less than the 445,000 tonnes exported during the same period last year, according to CARBIO, the Argentine Chamber of Biofuels. Meanwhile, accumulated exports to the EU the destination of around 70% of Argentinas biodiesel for January to March were just 153,000 tonnes, compared to 440,000 tonnes for the same period in 2012. Production is also down. In December last year, Argentina manufactured 136,000 tonnes of biodiesel compared to 217,000 tonnes in December 2011, representing a 38% year-on-year drop, according to Instituto Nacional de Estadstica y Censos (INDEC), the Argentine government statistics agency. The fall in production and exports has been very strong, says Carolina Schuff, an economist who analyses the biofuels sector at Buenos Aires consultancy abeceb.com. Theres no doubt the cause is the threat of anti-dumping duties. Argentina needs to find new markets, and exports to the USA have increased a little, she adds. It has been a torrid 12 months for Argentinas biodiesel producers. Last year was chaotic, says Francisco Juregui, executive director of the Chamber for Small and Medium Producers of Biofuels, which has approximately 20 members that employ a total of 3,000 people. He notes: The nationalisation of YPF was the first alarm bell after two years of bonanza. Juregui was referring to the decision made last

April by Argentinas nationalist and left-wing government of Cristina Fernndez de Kirchner to expropriate 51% of the shares of Argentinas energy company Yacimientos Petrolferos Fiscales (YPF) from Spanish energy giant Repsol, by means of emergency decree, citing a lack of investment. Spain, which receives around 50% of all Argentinas biodiesel exports, responded by announcing its biofuels quota for transport could only be met by EU production. Argentina branded the measure a violation of World Trade Organization (WTO) regulations, and late last year Spain backtracked. Due to its high production costs and economic crisis, Spain cant meet its biodiesel demand without imports from Argentina, claims Juregui. But then, in August, the Argentine government hiked the export tax on biodiesel exports from 14% to 24%, although it later moderated the increase to 19%, under pressure from producers. It also lowered the cost of biodiesel on the domestic market by 15% to a little less than one US dollar/tonne to guarantee a cheap supply for YPF, and moved away from the polynomial formula that had been used to establish prices. The impact on small-and-medium sized producers (making up to 20,000 tonnes/year), who sell only locally and have small profit margins, has been significant. And they are now apprehensive about possible anti-dumping duties. Our latent fear is that the large-scale producers, which export, will instead look to the internal market, an industry source says. We could end up facing a kind of internal dumping. This is all very ironic, given these large-scale producers, represented by CARBIO, are accused of dumping in the EU and benefiting from government subsidised exports charges they deny. The larger Argentine producers have labelled the EBB protectionist, an accusation that has (also ironically) been brought against Argentina during the

25 OFI JUNE 2013, BIOFUELS ISSUE www.oilsandfatsinternational.com

PHOTO: ARENACREATIVE/DREAMSTIME.COM

Argentinas biofuel producers are under threat as the European Commission (EC) is poised to impose anti-dumping duties on the countrys biodiesel exports. Jonathan Gilbert and Keith Nuthall explore the industrys response

Anti-dumping anger

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last year by countries like the USA, Japan and Mexico. Under Kirchner, Argentina has restricted imports in an attempt to promote national industry and halt a shrinking trade surplus. In a recent statement, CARBIO argues: There exists no form of subsidy on biodiesel exports from Argentina. It adds: CARBIO and its members reiterate their compromise to keep collaborating with the EC investigations so they can be closed definitively without the imposition of tariffs. EC investigators visited Argentine plants last month. There is no evidence whatsoever of dumping or export subsidies, says Gustavo Idgoras, CARBIOs international markets consultant. Were facing a crisis that may force plants to close down and the only reason is the protectionist lobby in Europe.

These European industry players point to Argentina imposing a 32% export tariff on raw soyabeans, 13% more than the current rate for biodiesel. But Idgoras rejects allegations that the differential export taxes (DETs) are effectively a subsidy for biodiesel. How can you allege that the DETs encourage the domestic sale of feedstocks? Argentina is the worlds third largest exporter of raw soyabeans [behind the USA and Brazil], Idgoras says.

A scapegoat for EU problems?

Idgoras also accuses Europe of pointing the finger at an external enemy in order to cover up its problems in the biodiesel sector, which include overcapacity. Spain, for example, uses just 14% of its installed capacity, according to the US

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Department of Agriculture (USDA)s Foreign Agricultural Service. The biodiesel demand in Europe is nine million tonnes a year, but they rode a financial bubble and invested in a production capacity of 22M tonnes a year, says Idgoras, who adds that it was still cheaper for the EU to ship Argentine biodiesel straight to its coastal refineries than to load up trucks at plantations in central and eastern Europe, and not because of the feedstock export duties. DETs in Argentina promote the industrialisation and verticalisation of the soya industry and, as a result, it is just that value-added products have lower export tariffs, says Jos Luis Martnez Justo, president of the biodiesel committee at CADER, the Argentine Chamber of Renewable Energies. Justo says it was absolutely erroneous to accuse Argentina of dumping. He also insists Europe cannot satisfy its biodiesel demand through local production, but revealed that in the face of registered imports and possible retroactive duties Argentina is looking for new markets, especially China, where it already exports an estimated 20% of its raw soyabeans and soyameal. With production and exports of Argentinas biodiesel falling, there has been a rise in soya oil exports, according to Germany-based Oil World, an independent forecasting service. Argentine exports of soya oil to the EU rose to 230,000 tonnes in February this year, a year-on-year increase of 80,000 tonnes. There are companies that are now focusing on oil, rather than biodiesel, Justo confirms.

Argentina to raise mandates

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Argentina's biodiesel mandate law, which went into effect in 2010, currently requires a seven percent blend, but that will rise to 10% in June. Analysts such as Schuff, however, say the increase is the result of an explosion at YPFs main refinery, which has forced the company to import more oil, rather than reduce biodiesel exports. Argentina is considered the worlds biggest exporter of soya biodiesel, which it ships from Rosario, a port in Santa Fe, the province where production is centred. In 2011, exports reached a record value of more than US$2bn. As Oils & Fats International went to press, the Argentine government launched what could be seen as a retaliatory action at the WTO, starting disputes proceedings alleging EU support for its biodiesel production broke world trading rules. Argentina highlights EU support for developing energy from renewable sources and its measures to control and reduce greenhouse gas (GHG) emissions, claiming that this illegally supported European biofuel production. Its dispute claim also criticised EU-funded support schemes for the European biodiesel sector. Jonathan Gilbert and Keith Nuthall are freelance journalists

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