OREANDA-NEWS. Argentina's biodiesel exports extended a sharp downward trend in the third quarter, falling by 56pc to 245,600 tons compared with a year earlier, as the industry continues to struggle with this year?s lower oil prices and the 2013 closure of European markets.

Exports dropped by 59pc to 81,800 t in July and by 59pc to 83,800 t in August, compared to the same month last year, according to official figures. Although there are no official figures for September, exports are likely to have declined around 51pc, compared to the same month last year, to 80,000 t, according to preliminary industry estimates.

If the September estimates are accurate, it would mean sales abroad have declined 56pc in the first nine months of the year, compared to January-September 2014, to 482,150t.

"At this point, I don?t know whether we will even break 600,000 t this year," said Victor Castro, head of the Argentinian biodiesel chamber Carbio, which represents the country's biggest export-oriented producers including Cargill, Louis Dreyfus and Bunge, among others. That figure would signify a 62pc plunge in exports, compared to the 1.598mn t of the soybean-based biodiesel Argentina's producers sold abroad last year.

Production is expected to total some 1.6mn t this year, or just 35pc of installed capacity of 4.5mn t/yr, according to Carbio's estimates.

The capacity shut-ins illustrate the continuing struggle to find alternative markets following the EU's 2013 imposition of anti-dumping tariffs on biodiesel imports from Argentina. That ruling effectively closed off what had been the largest and most reliable market for the country's biofuel.

Peru and the US have now emerged as the most important markets for Argentina's biodiesel, amounting to around 30pc and 70pc, respectively, of total sales abroad in recent months. Yet the two countries are not big enough to compensate for the loss of the EU market, Peru because of its market size and the US because of the stringent, and costly, requirements of traceability and segregation required for biodiesel imports.

"The markets we have left are, unfortunately, of very low volume," Castro said. "The genuine market for biodiesel is Europe."

When the EU first closed off its market, the local industry was able to rely on temporary spikes in conventional diesel prices to sell biodiesel to traders. But those opportunities vanished after the plunge in oil prices that began last year. Occasional sales of biodiesel to the US for heating oil also dried up as a result.

There is little hope in the industry for a quick turnaround barring a sharp spike in crude prices. In an ongoing arbitration to reopen the EU market, the World Trade Organization (WTO) could rule in Argentina?s favor at the end of November or early December, but inevitable appeals would delay implementation. "Even if they rule in our favor, all of 2016 is already lost," Castro said.

Although Argentina has a 10pc biodiesel blending mandate, most of the domestic demand is met by small and medium-sized producers.

Efforts earlier this year to revive a 10pc biodiesel mandate for thermal power generators failed to get off the ground. A tender launched by wholesale electricity administrator Cammesa raised little interest because of low prices and volumes.

But producers are optimistic that the country's next president will improve current regulatory conditions that often make it difficult for biodiesel exporters to plan ahead. Under a sliding-scale system, the government is supposed to update export duties monthly, but it rarely does. Instead, the government updates prices retroactively, leading to widespread complaints that producers are forced to deliver the biofuel without knowing how much they will owe at the time of shipping.

"The problem isn't the duties but rather that they change all the time," Castro said. "It turns into a lottery."

Market-oriented opposition candidate Mauricio Macri and ruling-party contender Daniel Scioli will face off in a run-off presidential election on 22 November after a surprisingly tight vote last month. President Cristina Fernandez de Kirchner steps down on 10 December.

"They have both given their support to biofuels," Castro said. "But none have laid out details on operations or specific issues."