Italy 2010 biodiesel output to fall 60 to 70 percent

MILAN (Reuters) - Biodiesel output in Italy, Europe's third-biggest producer, may plunge 60-70 percent this year after falling 50 percent in the first six months of 2010 hit by cheap imports, a top industry official said on Thursday.

"We have a strong fall in production in the first half of this year, of about 50 percent, because of rapidly growing imports," said Maria Rosaria Di Somma, director general of the industry body Assocostieri-Unione Produttori Biocarburanti.

"The situation is alarming and, unfortunately, our full-year forecasts are for a bigger (output) fall, of up to 60-70 percent, if the government does not take measures against illegal imports," Di Somma told Reuters in a telephone interview.

The European Commission, which oversees trade policy for the 27-nation bloc, imposed anti-dumping and anti-subsidy duties for up to five years on imported U.S. biodiesel in May 2009. But European industry has said such duties have being by-passed.

Italian biodiesel makers, who use mostly imported raw materials including palm oil and rapeseed oil, are unable to compete with imported fuel which costs less than their raw materials. Several plants have suspended production, Di Somma said, declining to name those plants.

She did not say where the cheap imports were coming from but previously she has said that such imports came from the United States and Argentina.

Italy's 2.5 million tonne biodiesel capacity was heavily underused in 2009, with just 694,000 tonnes produced there, up from 670,449 tonnes in 2008. Imports surged to 465,000 tonnes from 239,887 tonnes in 2008, according to Assocostieri data.

Biodiesel imports are on the rise this year, flooding the Italian market, and Assocostieri has appealed to the government to introduce measures against illegal imports in a new competition legislation being drafted at present, Di Somma said.

Earlier this year, Italian customs seized 10,000 tonnes of biodiesel of uncertain origin which could have been imported illegally.

BLENDING TARGETS

Biodiesel imports would take a lion's share of Italy's obligatory blending target for biofuels in total car fuel use this year. The target is set to be covered mostly by biodiesel, which is favored by Italian car fuel producers, Di Somma said.

As a result, Italy's bioethanol output is almost totally sold abroad, she said.

Italy has only two bioethanol producers with a total capacity of 215,000 tonnes, according to Assocostieri's data.

Italy should boost output of both biodiesel and bioethanol, with a focus on development of second-generation technologies, to be able to meet the European Union's targets which oblige member states to raise the share of renewable energy sources in transport to 10 percent by 2020, Di Somma said.

Italian industry and science have made important steps in research into use of algae as biofuel but it would take several years to find an economical way to start industrial production, she said.

Italy has raised the obligatory share of biofuels in the car fuel mix to 3.5 percent in 2010 from 3.0 percent in 2009. The target will be raised to 4.0 percent next year and to 4.5 percent in 2012 to catch up with the EU goals.

(Reporting by Svetlana Kovalyova, editing by Anthony Barker)