OUTLOOK ’13: Americas biodiesel makers hopeful yet uncertain

27 December 2012 21:00  [Source: ICIS news]

North American biodiesel is keeping a hopeful outlook going into 2013, following mandates by the US Environmental Protection Agency (EPA) calling for increasing production and use of renewable fuels.

The US biodiesel industry once again finds itself moving into a new year on political precepts rather than a solid supply/demand driven market.

While 2012’s US biodiesel production likely met Renewable Fuel Standard (RFS2) levels of 1bn gal (3.8bn litres) fort the year, despite the absence of the $1/gal federal tax credit, federally mandated production levels looking to 2013 are higher than this year.

The US Environmental Protection Agency (EPA) said in September that gasoline refiners must use 1.28bn gallons of biodiesel in 2013.

The mandate under the RFS program, which is meant to boost production of renewable fuels, is a 28% increase from the 1bn gallon requirement in 2012.

Refiners must produce biodiesel each year, with their contribution determined by their share of the fuel market, according to the federal law. Under rules set by the EPA, instead of producing fuel themselves, those refiners can buy credits from other producers to fulfil their obligations.

The fate of the RFS standard and the $1/gal federal tax incentive is considered to be critical by most biodiesel producers.

T
he tax credit’s fate in 2012 – and 2013 – is still questionable after expiring on 31 December, 2011.

"The loss of the biodiesel tax credit has created significant disruption in the industry this year," said Ben Evans, spokesman for the National Biodiesel Board (NBB). "Plants across the US have scaled back production or are idling altogether, and we’ve started to see layoffs."

A US Senate tax extenders package, which included the biodiesel tax credit, passed the senate finance committee markup in August 2012. It includes a biodiesel extension retroactive to 1 January of 2012 through the end of 2013.

However, with a congressional lame duck session this year the passage of the legislation is questionable. A lame duck session of Congress in the US occurs whenever one Congress meets after its successor is elected, but before the successor's term begins.

"Congress can address this and get the industry back on track by reinstating the tax incentive as quickly as possible, and we are urging leaders in both parties to make it a priority," Evans said. "We remain hopeful that they will do so as they wrap up year-end legislation."

With EPA mandates aimed at increasing production and use of all renewable fuels, US biodiesel has reason to expect improving solidarity within the sector and stronger supply/demand fundamentals that would bode a healthy industry.

But the fate of the federal tax credit and the political winds following the presidential election keep the outlook for ongoing success in US biodiesel uncertain.

Argentina

Biodiesel production in Argentina, one of the world’s largest producers, remains uncertain going into 2013 amid a trade row with Europe, higher federally mandated export tax and mandated lower domestic prices.

Approximately 90% of all Argentina’s biodiesel historically moves to Europe, with the balance going to Peru.

Argentine President Cristina Fernandez de Kirchner sent a bill to the Senate in April, under which the government expropriated a 51% stake in YPF, amid escalating tensions and accusations of continued decline in oil and gas production in the country.

Spain retaliated against Argentina curtailing Argentine biodiesel imports.

Biodiesel exports directed toward Europe have declined in recent months and are still uncertain going into 2013 amid an anti-dumping investigation.

The European Commission will investigate the impact of Argentinean and Indonesian biodiesel imports on the EU market. The Commission’s announcement in August comes as a result of a complaint lodged by the European Biodiesel Board (EBB) in July.

The complaint alleged that biodiesel was being sold below cost in the EU by Argentina and Indonesia - a practice known as dumping - which the EBB claimed was having a detrimental effect on the European biodiesel industry.

The Commission will decide whether to impose provisional anti-dumping duties on Argentina and Indonesia within the next nine months, with the investigation to be concluded within 15 months and a decision made whether to apply definitive levies for the next five years.

In addition to the trade row now underway with their biggest buyer, biodiesel producers in Argentina worry that new regulations in Europe will hamper trade.

The European Commission, in a major policy shift in September, said it planned to limit food-crop-based biofuels to 5% of consumption after criticism that biofuel output was responsible for rising global food prices.

European biofuel producers say this could devastate their business and bring an end to production of biodiesel from rapeseed in Europe.

Participants said the current uncertainty clouding the market is discouraging buying and new project investment, with legislation needed beyond the 2020 targets to prevent the industry and its related markets from becoming stagnant.

Biodiesel is a fuel produced from renewable resources. The most commonly used feedstocks are rapeseed, soy and palm oil.


By: Leela Landress
+1 713 525 2653



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