The Wall Street Journal; EU to Punish U.S. Biodiesel Exporters

March 04, 2009

The Wall Street Journal

The European Union voted for punitive antidumping tariffs on imports of U.S. biodiesel for six months, according to EU officials, threatening an industry that saw $1.5 billion in sales to Europe last year. Tuesday’s vote by a committee of trade officials from the EU’s 27 member states came amid plunging oil prices and growing protectionism around the globe — though the decision was based on a complaint filed by EU biodiesel producers in July, when oil prices were high and the global economy was healthier.

Europe has been a crucial market for U.S. biodiesel companies because European governments require oil companies to blend biodiesel with regular diesel. The goal of the punitive duties is to erase the advantage from a U.S. tax credit that industry brokers say allows U.S. exporters to sell biodiesel in the EU for $800 a ton, compared with the average $1,000 charged by EU producers over the past six months. The duties will amount to $400 to $500 per ton of biodiesel imported from the U.S., EU officials said.

U.S. producers “will get shut out of the EU market while the duties last,” says Kevin McGeeney, CEO of SCB Group, a Geneva-based broker. Several U.S.-based sellers could go out of business as a result, he said. U.S. producers have already been hammered by a collapse in crude oil prices that has made biodiesel more expensive to buy than regular fossil fuel, as well by an excessive buildup of plant capacity. Biodiesel is made from plants such as rapeseed, oil palm and soybeans, or from discarded vegetable oil.

Officials in the U.S. biodiesel industry say they plan to ride out the provisional phase of the high import tariffs. The EU is due to decide later this year whether to extend the duties for a period of five years. U.S. companies say they hope to get the duties reduced, arguing that the $300 per ton U.S. tax credit didn’t injure a sufficient number of European producers during the period surveyed, as required to justify extra duties under World Trade Organization rules. In this case, the reference period in 2007 and 2008 was a time of high oil prices during which most biodiesel companies prospered because biodiesel was cheap by comparison to regular fuel.

“The data in the case show the EU industry has not been harmed by U.S. competition, which is the basis for imposing duties,” says Manning Feraci, vice president of the National Biodiesel Board in the U.S. “This is just one step in the process.”

European producers complained the tax credit made U.S. biodiesel cheaper than its raw materials.
Brokers say the new tariffs won’t necessarily be a boon to European producers because Argentinean and Asian biodiesel is $50-$100 a ton cheaper than fuel produced in the EU. These importers are likely to take over the U.S. segment of the market.

By John W. Miller

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