EU to launch probe into Argentinian biodiesel subsidies

The EU Commission is to launch an investigation whether producers of Argentinian biofuels – predominantly soy methyl ester (SME) – have benefitted from subsidies, according to a log in the EU Official Journal, a move that could lead to higher tariffs on imports.

The investigation, which was widely anticipated, follows a complaint by lobby group for the European Biodiesel Board (EBB), which represents companies responsible for European biodiesel.

“Having determined… that the complaint has been lodged by or on behalf of the Union industry and that there is sufficient evidence to justify the initiation of a proceeding, the Commission hereby initiates an investigation,” the journal said.

The investigation will revolve around whether biodiesel producers in Argentina, such as agribusiness giants Bunge, Cargill and Louis Dreyfus and local biodiesel producer Renova, have benefitted from cheap soybeans, government support in buying biodiesel and other forms of subsidies such as loans or tax not collected.

Those subsidies mean that Argentinian exporters can sell biodiesel into Europe a lower cost than European feedstocks, according to a statement from the EBB in September.

The move comes more than a year after the WTO ruled in October 2016 that EU countervailing duties of 22-25% on imports of Argentinian biofuel were illegal.

In response to that ruling, in September last year the EU slashed those duties to 4.5-8.1%, but that was shortly followed by the imposition of punitive tariffs by the US on Argentinian biodiesel of more than 70% – which effectively bars Argentinian biofuels from being sold in the US.

Since the EU duty cut and concurrent rise in US import taxes, European imports of Argentinian biodiesel have soared, with 600,000 mt of biodiesel sold into Europe from September through January, according to trade sources.

According to figures from the Centro de Estudios del Sistema Agroalimentario, Argentinian exports of biodiesel in 2017 reached 1.68 million mt, with around two thirds heading to the US – a lucrative market that will disappear for the foreseeable future.

“This is a legitimate fight to protect the EU biodiesel market – and the 120,000 jobs it supports – from a heavily subsidised export-oriented industry. We are prepared to do whatever it takes to limit the recurring Argentinian biodiesel imports,” said one biodiesel trader at a global oil major who was speaking on condition of anonymity.

“They had to do something once the US moved. The EU will solve this problem.”

Argentina is the world’s third biggest producer of soybeans and soyoil.