Argentina's biodiesel production is on track to decline 30% this year, as rising domestic consumption fails to compensate for dwindling exports, the head of an industry group said Monday.
Claudio Molina, the executive director of the Argentine Biofuels and Hydrogen Association, said output of the fuel additive likely will end the year at no more than 1.8 million mt, or 30% less than the 2.58 million in 2014.
Exports are poised to contract 55%, while domestic consumption is due to rise 11%, he said.
This means that the industry will be working at about 40% of the 4.6 million mt of installed capacity, he added.
Molina, however, said he is optimistic of a gradual turnaround following a runoff presidential election later this month. Both of the candidates in the November 22 election, Buenos Aires Mayor Mauricio Macri and Buenos Aires Governor Daniel Scioli, are moderates who are expected to take steps to improve business conditions, Molina said.
One help would be to increase the biodiesel blend in diesel to 12% from a current 10%, and later take it to 15%.
"This would be more than welcome," he said.
Another step would be to mix biodiesel into diesel as power plant fuel and to require agriculture transport and passenger buses to use a 20% blend, he added.
However, Molina said it is a recovery in international shipments that would allow producers to recover capacity use.
Exports started declining in 2012 after the European Commission launched investigations into alleged dumping of the product by Argentina, prompting the EC to raise taxes on the imports. Argentina has since filed a complaint in the World Trade Organization against the EU for the anti-dumping duties.
The lawsuit should reopen the EU for Argentine biodiesel supplies by as soon as 2017, which would give a huge boost to exports. Europe is a world leader in biodiesel consumption.
Biodiesel production fell 23% to 780,283 mt in the first half of 2015 compared with 1.02 million mt in the year-earlier period, according to the latest data of the Argentine statistics agency Indec. Over the same period, exports fell 55% to 236,550 mt, compared with 524,216 mt, while domestic consumption rose 30% to 525,883 mt from 404,632 mt, Indec said.
