Italy 2011 biodiesel output seen down 32 percent

MILAN (Reuters) - Biodiesel output in Italy, a major producer in the European Union, is set to fall to 500,000 tonnes at best this year, a 32 percent drop from 2010, hit by soaring inflows of cheaper imports, a senior industry official said on Friday.

The Italian industry produced 211,234 tonnes of biodiesel in the first six months of this year and second-half output is expected to be broadly similar, Maria Rosaria Di Somma, director general of the industry body Assocostieri-Unione Produttori Biocarburanti, told Reuters.

"The situation is dramatic ... This year we will produce about 500,000 tonnes, if everything goes well," Di Somma said in an interview on the margins of a green energy conference, cutting her previous 2011 output forecast of 600,000 tonnes.

Italian biodiesel makers, who use mostly imported raw materials including palm oil and rapeseed, have been hit hard in the past couple of years by cheap imports which sometimes cost less than the raw materials, industry experts say.

Italy produced 731,844 tonnes of biodiesel last year when it imported 639,684 tonnes of the fuel to meet a demand of about 1.3 million tonnes, according to data on the Assocostieri website. (www.assocostieri.it).

Biodiesel imports are expected to cover two thirds of Italy's 2011 biofuel demand estimated at about 1.5 million tonnes, with the cheaper imports coming mainly from Argentina, Canada, Indonesia, Malaysia and the United States, Di Somma said.

Many Italian biodiesel makers have suspended output pending an improvement of market conditions. Sector-wide capacity utilization is currently estimated at about 30-40 percent, she said.

Italy's biodiesel capacity, including plants under construction and idled plants, is about 2.4 million tonnes a year, the Assocostieri data showed.

A number of European biodiesel refiners are likely to close down in coming months under pressure from imports, industry experts say.

OBLIGATORY TARGETS

Biofuels demand is determined by Italy's obligatory targets for its use in automotive fuel, part of the EU fight against climate change. Biodiesel accounts for lion's share of biofuels use in Italy.

The obligatory share of biofuels in automotive fuel is 4.0 percent for 2011 and will rise to 4.5 percent in 2012 and 5.0 percent by 2014.

Italy has yet to define steps beyond 2014 to reach a 10 percent target for biofuels use set for 2020 by Brussels. Nor has it issued decrees necessary to bring national regulations in line with EU ones, Di Somma said.

"The situation is going to get worse from January 1 of 2012 when certification of (biofuels) sustainability will become necessary," she said.

Italy lags behind many rival biofuel producers which have already set up national certification systems to meet EU standards and that is likely to boost inflows of imported biofuel into Italy next year, Di Somma said.

Biodiesel imports to Italy covered 51 percent of the target-driven biofuels sales in 2010, up from 36 percent in 2009, the Assocostieri data showed.

(Reporting by Svetlana Kovalyova; editing by Jason Neely)