PARIS (Reuters) - Strong oil prices and a spike in demand has allowed Avril’s biodiesel plants to run at full capacity since June but Argentine imports could force the European Union’s largest biodiesel maker to return to part-time work, its CEO said on Tuesday.
Europe’s biodiesel industry has been struggling since the EU reduced duties on imports from Argentina last year after Buenos Aires mounted a successful challenge at the World Trade Organisation.
Avril implemented a six-month plan to reduce production at its oilseed processing unit Saipol in March, blaming huge Argentine biodiesel imports for exacerbating poor market conditions.
“We will renew the part-time work for another six months because even though there is some progress, Argentine biodiesel is still coming massively into Europe every month,” Avril Chief Executive Jean-Philippe Puig told Reuters.
European producers are hoping that the European Commission will implement new taxes on biodiesel imports in September following renewed allegations that Argentina unfairly subsidised its biofuel sector.
“For the moment we are running at full capacity but how long this will last, I have no idea,” Puig said.
Saipol found sufficient demand to run at full capacity for another two months, he said.
Oil prices have surged in recent months, mainly supported by U.S. sanctions on Iran increasing fears of tight supplies. Higher oil prices improve margins for biofuel makers.
Prices have also been supported by buyers starting to cover their biodiesel needs for next year in anticipation of higher prices following a new EU tax.
Industry sources said earlier this month that the threat of tariffs already halted Argentine biofuel sales to the EU, adding that imposing a tax would leave 85 percent of the country’s biofuel exports without a viable market.
Avril produced of 1.4 million tonnes of biodiesel in 2017, from a capacity of 1.8 million. Production was expected to fall this year due to the reduced output implemented in March but the recent pick-up should allow it to make up for most of the shortfall, Puig said.
The increase in biodiesel demand was also linked to growing diesel consumption and rising blending mandates in some EU countries, Puig also said.
Reporting by Sybille de La Hamaide. Editing by Jane Merriman