EU scraps AD duties on US ethanol, but impact could be small

The EU's scrapping of anti-dumping duties on US ethanol has prompted sharply divergent assessments of the potential impact on European producers, with the main European lobby for the biofuel warning of cheap imports, while some traders point to other regulatory hurdles that would dent the attractiveness of US shipments. 

The EU Council, which includes representatives of member state governments, said that the duties of around €62 per tonne had been scrapped because the European Commission concluded that reoccurrence of US anti-dumping was "unlikely".

"Having considered all the evidence available before it... the Commission concluded that there is no likelihood of recurrence of dumping should the measures be allowed to lapse," the EU Council said in a document published in the EU's Official Journal on Wednesday.

The decision effectively ends a dispute that has been running since 2013 when European producers lobbied successfully for antidumping duties, prompting a rash of lawsuits and appeals from the US ethanol sector - a heavy user of corn.

In view of its conclusion that there is no major likelihood that the dumping of US ethanol will reoccur, the announcement in the Official Journal added that there is no need to analyse the likelihood of recurrence of injury and the interests of EU producers. 

It said: "The measures on imports of bioethanol originating in the US should therefore be repealed and the proceeding terminated."

European producers have said repeatedly that anti-dumping duties are justified because the US makes far more ethanol than can be consumed domestically, and could send close to 1.5 billion litres of their product to Europe because other countries such as China and Peru, have closed off their market to US ethanol.

US producers have long contended that they had no unfair advantage from selling ethanol into the EU because of the extra costs involved in converting the biofuel so it is compliant for use in vehicles in the 28-nation bloc.

"The EU’s decision to repeal anti-dumping duties on fuel ethanol imports originating in the US risks having serious consequences for the entire value chain of the European renewable ethanol industry – which accounts for 55,000 direct and indirect jobs in the EU," industry body ePURE said in a statement. 

"It would also affect EU climate ambitions by favouring US ethanol – which is more carbon-intensive than European ethanol," ePURE said.

However, it is this higher carbon-intensity that is cited as a reason why US ethanol, most of which is based on corn, will find it difficult to compete with European origins of the biofuel.

US-based sources expected the impact to be minimal, however, as only a handful of producers are certified to export to the bloc, with one source estimating it may only bring 100 million gallons (378 million litres) of new demand.

Carbon footprint

EU ethanol often has a considerably lower carbon footprint that is certified for use in the EU's renewable transport scheme, in theory making it much more attractive to blenders and fuel companies that are required to meet blending mandates. 

However, ePURE noted that the decision had come at a time when other key US export markets, including Brazil, China, Peru and Colombia, have already introduced or are considering measures to protect themselves from unfair US ethanol exports.

Arbitrage window

"This increases the risk that US exporters divert exports previously targeting these countries to the EU," ePURE said, although some market sources are sceptical that a sufficiently large 'arbitrage window' will open up for US ethanol into the EU.

China on May 13 said it would impose an additional 25% tariff on US ethanol, one of 6,000 products that could be subject to extra duties from next month amid a major trade war escalation between the countries.