Opportunities for Crude Tall Oil Following EU's Anti-Dumping Ruling on China

The EU’s recent ruling on anti-dumping tariffs for Chinese biodiesel imports has already created a shockwave in the biofuels industry. As industry agents seek new opportunities, several feedstocks offer great potential for revived interest in the market.

Case-in-point: crude tall oil (CTO). The advanced biofuel feedstock, a by-product of pulp and paper production in the forest products industry, could see an uptick thanks to the changes occurring in the biofuel industry.

This blog post will lay out the details around CTO’s opportunity and potential. You can also register for our live webinar about the EU’s anti-dumping tariffs on China for an in-depth look at the market and how to strategically plan for the changes.

How EU Anti-Dumping Ruling is Disrupting the Biofuels Status Quo

To summarize, the EU has declared provisional anti-dumping charges ranging from 23.7% up to 36.4% on most Chinese biodiesel and HVO imports beginning August 16. The ruling will disrupt what was the largest biodiesel and HVO import source in Europe.

Read More: EU Anti-Dumping Ruling on China Marks Serious Shift in Biofuels Market

Because of this ruling, the landscape for biofuels will yield rapid shifts in the EU and other markets such as the US. This will likely place a very heavy production demand to accommodate the growing adoption of biodiesel in wake of mandates and requirements like the Renewable Energy Directive (2018/2001) or RED II.

The Growing Demand for Imported Feedstocks

RED III mandates, introduced at the end of 2023, have shifted European biofuel requirements even further than RED II. Accordingly, the markets will see a broader outreach for feedstocks to help produce enough biofuel to satisfy the requirements.

By 2030, the adoption of required biofuel will effectively triple from the 2020 numbers. This will mean a much greater demand for these fuels to stay in compliance with the mandates.

With the changes coming from the current rulings on Chinese imports, these volumes must come from a considerably smaller supply pool.

Other global sources of biodiesel, HVO, and SAF feedstocks do not even come close to the amounts produced in China. To fill this market gap, we will see a resurgence in EU biodiesel and HVO manufacturers using imported feedstocks.

The change will lead to the adoption of multiple sources of advanced feedstocks to meet this need. One of those advanced feedstocks is crude tall oil.

The Role of Crude Tall Oil in Future Fuels

Crude tall oil is a byproduct derived from the wood pulping process. It primarily comes from the production of paper and other wood pulp-based products. It consists of a mixture of fatty acids, rosin acids, and other organic compounds, making it valuable for various industrial applications.

This viscous material is frequently used in the manufacturing of soaps, detergents, and adhesives. However, it has enjoyed a growing application in the production of biofuels as well.

How This Impacts Pulp and Paper Producers

With the increased demand and value of CTO as a byproduct of the kraft pulping process, producers have the opportunity to tap into an additional revenue stream. By capitalizing on the rising value of CTO, companies can not only boost their profitability but also gain a competitive edge in the industry.

This shift towards utilizing CTO as a valuable feedstock for biofuels production presents a strategic advantage for producers looking to diversify their product offerings and stay ahead in a rapidly evolving market landscape. As the demand for biofuels continues to grow, leveraging the potential of CTO can position producers for long-term success and sustainability in the biofuels industry.

At the beginning of last year, according to FisherSolve, there were 187 mills extracting tall oil. Because prices had been historically lower, and due to the differences in yield and quality by wood species, not all pulp mills were producing crude tall oil. However, since then, increased interest in using CTO to produce biofuels has heated up the tall oil market, and with anti-dumping duties in place, we believe it will amplify even more.

CTO Market Trends Leave Room for Opportunity

CTO is a listed feedstock for the production of advanced biofuels according to Annex IX of the RED II. But it has often remained out of the broader conversation due to its market position, pricing trends, and the availability of cheaper feedstocks.

This dynamic has shifted in response to the closing off of Chinese HVO and biodiesel from the market. CTO producers now have a potential opportunity to benefit from the changing markets and demand for biofuel feedstocks outside of Chinese imports.

Similar to many other low-carbon feedstocks, prices for CTO shot up to extremely high levels in late 2022 and early 2023. This came in response to producers scrambling to find feedstocks suitable to help meet various mandates.

However, these prices have subsequently crashed through 2023 and into 2024:

(Source: Prima CarbonZero)

Unsurprisingly, the main culprit behind these price drops was the widespread availability of imports from China. Now that the anti-dumping duties are in place, these lower-priced options will disappear from the market.

The shifting dynamics could open up a space for an upcycle in CTO. The duties on Chinese imports will quickly move producers away from their materials. Alongside new SAF mandates, this could mean a significant boost in demand for CTO as a feedstock in European biofuel production.

Watch: Live Webinar Covering EU Anti-Dumping Duties on China This Friday, August 2

The EU's anti-dumping duties will soon take effect on Chinese biodiesel and HVO imports. This decision will very quickly affect the state of the biofuels market both in the EU and far beyond.

Regions such as the US, where feedstocks like CTO are extracted through forest products manufacturing, could see big changes compared to the current state of the market.

To better understand the impact of these changes, join us for a live webinar, After China Anti-Dumping: The International Biofuels Landscape this Friday, August 2 at 10:00 AM EST (2:00 PM UTC).

Presented by Mat Stone, Founder of Prima Markets and ResourceWise's VP of Business Development, the webinar will cover all critical topics related to this ruling.

• What Exactly Happened: Details on the provisional tariff structure, including elements like timelines, exemptions, and the implications.
• How the Market is Shifting (and How to Respond): Current biofuel volumes and what's at stake, how Chinese biofuel and UCO trade flows will change, and how EU biofuel production will resume.
• Trends and Opportunities: How current trends in products such as sustainable aviation fuel (SAF) and bio-bunkering in the maritime markets will be impacted by the change, precedents, and planning based on the US elections, and the opportunities many biofuels and feedstocks manufacturers may have.
• Planning and Strategy Development: What ESG-driven markets will require and how markets such as US forest products can prepare for the road ahead.

Don't miss this valuable opportunity to get a jumpstart on your own organizational planning surrounding the changing biofuels landscape. Sign up for the webinar today and we'll see you on Friday!

Register for the webinar now using the link below and reserve your spot.