Argentine biodiesel exports seen firm despite law
Argentina is set to implement a law requiring diesel to be blended with biodiesel in the coming weeks, but the nation's key exports of the green fuel could still rise as production soars
Maximilian Heath | Reuters | Feb 26, 2010
Argentina, a leading exporter of biodiesel and the No. 1 soyoil supplier, was due to introduce the law on January 1, but it was delayed until the government agreed to allocate supply quotas to the country's top producers, industry sources say.
"The delay was caused by the need to adjust the biofuels program to fit with the possibilities of the domestic market, overcoming the hurdle caused by the law," said Claudio Molina, chief executive of the Argentine Association of Biofuels and Hydrogen (AABH).
The law was designed to boost production by the country's small- and medium-sized distillers.
However, with smaller plants unable to meet the extra 860,000 tonnes of annual demand created by the 5 percent blend requirement, Argentina has opened this year's supply quota to big oilseed crushers such as Vicentin, Glencore, Louis Dreyfus and Molinos Rio de La Plata.
Protracted negotiations over the price of biodiesel being sold in the local market also delayed the law's introduction, said Carlos St. James, president of the Argentine Chamber of Renewable Energies (CADER).
"In April you'll start seeing it at the pumps everywhere, that your gasoil is being mixed with 5 percent biodiesel ... it's on now, it's not going to be delayed anymore," he said, adding that production would grow sharply.
"There was this silent market with installed capacity that is suddenly going to come to life," he said.
Argentina produced about 1.2 million tonnes of biodiesel in 2009 -- virtually all of which was exported -- and industry groups estimate an output of between 1.6 million and 2.2 million tonnes this year.
EXPORTS SEEN FIRM
The South American country's biodiesel industry started to take off in 2007, when it exported the fuel for the first time, shipping a modest 170,000 tonnes.
A brisk market for plant-based fuels in European Union countries has seen Argentine exports increase more than five-fold and the country is now one of the biggest global providers of biodiesel -- irking producers in Europe.
Argentina's biodiesel law is not expected to dent fast-growing exports, and some industry analysts think shipments of the fuel will rise further this year in spite of the vast new domestic market.
"Producers have enough installed capacity to meet the needs of both the internal and export markets," AABH's Molina said.
Exports should rise to about 1.4 million tonnes this year compared with last year's 1.2 million, according to CADER's St. James.
Gabriel Obrador, vice president of the Argentine Chamber of Biofuels (CARBIO), said between 300,000 and 400,000 tonnes will be diverted away from the export sector as the new law comes into effect.
Biodiesel shipments from Argentina face an export tax of 20 percent compared with 32 percent for soyoil, which could mean soyoil exports are more heavily impacted by the blending law.
Increasing global output of biodiesel will likely restrain soyoil exports this year by top suppliers the United States, Brazil and Argentina, according to the Hamburg-based oilseed analyst group Oil World.
Argentina became the world's top biodiesel supplier in 2009, according to the AABH association. CARBIO expects it to overtake the United States as the No.1 exporter this year.
"This is a very promising industry, even though it's still just starting. However, it's making solid progress because governments have decided to take action on global warming and actively reduce emissions of greenhouse gases," Obrador said.
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