US biodiesel trade to EU continues at low blends without duties

24 September 2009 18:50  [Source: ICIS news]

HOUSTON (ICIS news)--US biodiesel producers have found a way to skirt duties against their material in the lucrative European market, selling blends of biodiesel not covered under punitive EU duties on their renewable fuel, sources said on Thursday.

Traders said they have seen an increase in the past few months of US biodiesel going to Europe at blends below B20 (20% biodiesel, 80% mineral diesel). After fielding complaints that subsidised US biodiesel was flooding the European market, the EU in March slapped heavy countervailing duties on imports of US biodiesel at blends of B20 and above.

Those duties dammed the flood of US biodiesel that suppliers ADM, Cargill and Peter Cremer and oil suppliers were sending to Europe. In 2008, the US sent more than two-thirds of its biodiesel to the EU.

But now traders are seeing a trickle resume eastward across the Atlantic.

“There has been an increase over the past few months,” said Starsupply trader Luke Watts, who buys and sells biodiesel for the European market. “With the countervailing duties, it’s slightly cloak and dagger at the moment. But you can be sure many counterparties are doing it.”

Watts and other traders said that US biodiesel producers are benefiting from a combination of the relatively high cost of European biodiesel and US-EU arbitrage opportunities in the mineral diesel market.

There is no official information on the volume of US biodiesel moving to Europe, but it has picked up since the door slammed on trade in March, traders said.

“The major trading oil companies are shipping one or two cargos a month,” a trader in Houston said.

The arbitrage window for US B5 fatty-acid (FAME) biodiesel into Europe was heard at $975/tonne (€663/tonne) CIF (cost, insurance and freight) Rotterdam, which would net back to about $2.00/gal FOB (free on board) USG (US Gulf). Blended US biodiesel was assessed at $1.95-2.05/gal FOB USG, according to global chemical market intelligence service ICIS pricing.

Traders said most B5 blends were heading to the UK and B7 blends to France. One source said the occasional cargo of B19 blend also sailed to Europe. 

But even that trickle could stop as the weather changes. Most European buyers look for FAME blends that can function in temperatures below -5º C (23º F), a product mostly unavailable in the US.

“The problem is we’re stuck in a situation where people are more comfortable with the system, but now they need FAME -5 minimum,” the Houston trader said.

($1 = €0.68)

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By: Ben Lefebvre
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