OREANDA-NEWS. Imported biodiesel's share of the US on-road diesel pool is set to double in 2016 as suppliers in Argentina and elsewhere boost volumes after the US government issued clearer rules for blending tax credits and volumes.

The recent devaluation of the Argentine peso by 25pc will further promote biodiesel's competitiveness on US shores. Argentina supply already benefits from its own government subsidies.

Already facing pressure from partially subsidized imports, US producers will be further squeezed next year from even cheaper foreign product entering the market.

Net biodiesel imports will continue to grow relative to domestic supply moving forward, with imports expected to increase by 68pc from 28,000 b/d to 47,000 b/d in 2016, according to the Energy Information Administration (EIA). US production is forecast to increase by 23pc from 87,000 b/d to 107,000 b/d in the same period. With mandated biodiesel blending volumes set at 1.73bn bl in 2015 and at 1.9bn bl for 2016 under the US Renewable Fuel Standard (RFS) program, imports as a percentage of implied US supply are poised to increase from 25pc this year to 38pc next year.

US producers will be able to operate with more clarity and higher margins next year following the passing of a 1$/USG blending tax credit (BTC), which will be retroactively applied to 2015. Foreign suppliers will also benefit from the credit by extension, as prices increase to adjust for the government subsidy.

The restoration of the credit will also pressure D4 RIN prices, as the BTC encourages blend economics.

The US biodiesel industry was pressured by a large volume of imports in 2015 following the Environmental Protection Agency's decision in January to approve Argentinian product to qualify for D4 biodiesel Renewable Identification Numbers (RINs) under the RFS program. Biodiesel imports climbed to their highest levels in six years, while domestic production fell below last year's output amid stubbornly low margins.

Through the first nine months of 2015, total US biodiesel imports as measured by the EIA surpassed 5.3mn bl, more than doubling the 2.5mn bl from the same period last year and outpacing this year's export volumes by 300pc.

Argentinian biodiesel accounted for nearly 50pc of this total, as foreign suppliers have sought larger profits in the US by taking advantage of the ability to generate D4 RINs. In total, imported and foreign-produced D4 credits have made up 22pc of total biodiesel RIN generation this year, the highest proportion since 2010.