U.S. Biofuel Markets Are in Turmoil Over Imports From China

Tensions are brewing in the US biofuels industry.

Competition from overseas and regulatory uncertainty at home have roiled markets for green diesel and jet fuel.

The turmoil is centered on a spike in American imports of used cooking oil from China. The surge has weakened demand for US soybean oil and other farm products that can be turned into fuels for trucks, buses and airplanes.

Now, some agriculture groups are calling for government action, including higher tariffs, to curb the wave of shipments.

But fuel makers warn of government overreach that would likely crimp already tight supplies of low-carbon feedstocks at a crucial time for the industry.

Measures such as tariffs would be “short-sighted” and amount to playing “protective politics,” said Michael McAdams, president of the Advanced Biofuels Association. It’s better to “allow the feedstocks to move around the world where they can best be used.”

It’s a classic faceoff between commodity producers and raw-material buyers, and adds to deep divisions over jet-fuel mandates, palm oil supply and other thorny issues debated this week at multiple industry gatherings.

Biofuel makers and feedstock providers also are awaiting details on a new production tax credit set to kick in next year. Trade groups ranging from aviation to renewable gas producers wrote this week to Treasury Secretary Janet Yellen, urging her to give guidance.

Regulatory murkiness and global competition are among reasons why US bio-based diesel is poised to face its biggest test since the industry first took shape three decades ago, according to Tore Alden of cross-commodity price reporting agency Fastmarkets.

“Secure your feedstock supply and secure it now,” Alden said at a conference held by his firm in Chicago this week. “The next three to five years are going to be different. Challenging.”

–Kim Chipman, Bloomberg News