Argentina’s biodiesel exports set to plunge

The uncertainty comes at a time when exports were already plunging because of EU sanctions that are keeping out Argentinian biofuel. Although shipments had been largely increasing this year, that trend is expected to take a sharp turn in September as new controls against the biodiesel take effect.

In August, Argentina shipped 160,000t of biodiesel, virtually even with the same month last year, according to Carbio, Argentina's biodiesel industry group that represents the largest, export-oriented firms. In the first eight months of the year, shipments abroad rose by 19pc over the same period last year. But that is expected to turn into a 17pc yearly drop by the end of 2012, with an estimated 1.4mn t exported, Carbio said. Unless there are unexpected changes in the sector, Carbio estimates 70,000t will be exported in September, and 30,000t in each of the last three months of the year.

Such a move would mark the first contraction in Argentina's annual biodiesel exports since the country's exponential growth began in 2007.

The plunge is due, at least in part, to a 10 August measure that reduced domestic prices for the soybean-based fuel by 15pc to 4,405.3 Argentinian pesos/t ($957.4/t) and increased the biodiesel export duty to 32pc, up from 20pc. Intricacies of the tax code made the effective duty 24.2pc, up from 14.2pc.

Government officials insisted last week they were helping the sector by cutting the effective duty 24.2pc to 19.11pc, but industry executives from say they still do not know whether the adjustments will be enough to reactivate plants.

“We're still waiting for something to be published,” one executive of a small plant said of the changing rules. “The truth is that in order to protest we have to know the details, but I believe we will still be in dire straits.”

The measure unveiled last week calls for an intra-ministerial commission to adjust the export duty every 15 days using a formula that takes into account changing supply costs – essentially fluctuations to the price of soybean oil – as well as a reference price based on global biodiesel prices. When calculating the costs, the government will assume a 4pc profit margin.

The commission is also charged with setting a domestic price based on a formula that takes the reference price and subtracts the equivalent export duty.
For large plants, an export duty of 19.11pc “could be reasonable,” according to an industry executive.

“Several small producers might find it makes sense to continue operating in order to pay off their plant, but it likely won't be enough to encourage new investments,” another executive said.

The government encouraged independent and small producers to enter the market in order to break a hold that the largest multinationals had on the industry. Now it is the largest integrated biodiesel plants that might be the only ones to survive the recent measures.

The uncertainty Argentina's government has injected into the sector comes at a time when biodiesel producers are facing trouble finding buyers in Europe. Spain, which bought more than 900,000t of Argentinian biodiesel in 2011, has said it will stop purchases. The move is widely seen as retaliation for Argentina's expropriation of the majority shares in energy company YPF from Spanish oil company Repsol.

Please visit ArgusMedia.com or more information.

Copyright © 2012 Argus Media Ltd. All rights reserved. By reading this article, you agree that you will not copy or reproduce any part of its contents (including, but not limited to single prices or any other individual items of data) in any form or for any purpose whatsoever without prior consent of the publisher.