By Chen Aizhu

SINGAPORE, Aug 16 (Reuters) - Chinese biodiesel manufacturers are seeking brand-new outlets in Asia for their exports and exploring producing other biofuels as supply to the European Union, their most significant buyer, dries up ahead of anti-dumping tariffs, biofuel executives and analysts said.

The EU will impose provisional anti-dumping responsibilities of in between 12.8% and 36.4% on Chinese biodiesel from Friday, striking over 40 companies including leading manufacturers Zhejiang Jiaao, Henan Junheng and Longyan Zhuoyue Group in an export organization that was worth $2.3 billion last year.

Some larger producers are eyeing the marine fuel market in China and Singapore, the world’s top marine fuel center, as they seek to balance out already falling biodiesel exports to the EU, biofuel executives said.

Exports to the bloc have fallen greatly considering that mid-2023 amidst investigations. Volumes in the first 6 months of this year plunged 51% from a year earlier to 567,440 loads, Chinese customs data showed.

June deliveries diminished to just over 50,000 loads, the lowest given that mid-2019, according to customs data.

At their peak, exports to the EU reached a record 1.8 million loads in 2023, representing 90% of all Chinese biodiesel exports that year. The Netherlands was the top importer in 2023, taking in 84% of China’s biodiesel deliveries to the EU, followed by Belgium and Spain, Chinese customs figures showed.

Chinese manufacturers of biodiesel have enjoyed fat earnings over the last few years, making the many of the EU’s green energy policy that grants subsidies to business that are utilizing biodiesel as a sustainable transport fuel such as Repsol, Shell and Neste.

Much of China’s biodiesel manufacturers are privately-run small plants using scores of employees processing waste oil gathered from countless Chinese restaurants. Before the biodiesel export boom, they were making lower-value goods like soaps and processing leather items.

However, the boom was short-term. The EU started in August in 2015 investigating Indonesian biodiesel that was believed of circumventing responsibilities by going through China and Britain, followed by a 14-month anti-dumping probe into Chinese biodiesel believed to be priced synthetically low and damaging regional producers.

Anticipating the tariffs, traders stockpiled on used cooking oil (UCO), raising costs of the feedstock, while costs of biodiesel sank in view of shrinking need for the Chinese supply.

“With large prices of UCO partly supported by strong U.S. and European demand, and free-falling item costs, business are having a difficult time enduring,” stated Gary Shan, chief marketing officer of Henan Junheng.

Prices of veggie oil, or HVO, a primary type of biodiesel, have cut in half versus last year’s average to the existing $1,200 to $1,300 per metric lot and are off a peak of $3,000 in 2022, Shan included.

With low prices, biodiesel plants have cut their operations to a lowest level of under 20% of existing capacity on average in July, down from a peak of 50% last seen in early 2023, according to Chinese consultancies Sublime China Information and JLC.

Meanwhile, diminishing biodiesel sales are increasing China’s UCO exports, which experts predict are set to touch a new high this year. UCO exports soared by two-thirds year-on-year in the very first half of 2024 to 1.41 million tons, with the United States, Singapore and the Netherlands the leading destinations.

OUTLETS

While numerous smaller sized plants are most likely to shutter production indefinitely, bigger manufacturers like Zhejiang Jiaao, Leoking Enviro Group and Longyan Zhuoyue are checking out new outlets including the marine fuel market at home and in the important hub of Singapore, which is utilizing more biodiesel for ship fuel blending, according to the biofuel executives.

Among the producers, Longyan Zhuoyue, agreed in January with COSCO Shipping to use more biodiesel in marine fuel.

Companies would also accelerate preparation and structure of sustainable aviation fuel (SAF) plants, executives said. China is expected to reveal an SAF required before completion of 2024.

They have also been searching for new biodiesel clients outside the EU bloc, in Australia, Japan, South Korea and Southeast Asia where there are local requireds for the alternative fuel, the authorities added.

(Reporting by Chen Aizhu