PARIS, March 7 (Reuters) - Rising biodiesel imports from Argentina and an expected surge in shipments from Indonesia threaten to cripple output in the European Union, the world's top producer of the renewable fuel.
The European Union slashed import duties on Argentine biodiesel last September after Buenos Aires mounted a successful challenge at the World Trade Organisation, weeks after the United States imposed steep duties on the fuel.
The bloc is now considering whether to cut duties on Indonesian biodiesel.
Argentine soybean-based fuel is now entering the EU at much lower prices than rapeseed oil, the main material used by European producers, who say they cannot compete and in some cases are being pushed to the verge of bankruptcy.
Between August last year and January, 852,000 tonnes of biodiesel - around four times the capacity of a large EU plant - worth $617 million, were exported from Argentina to the bloc, customs data showed. Earlier in 2017, nearly all exports were heading to the United States.
Raffaello Garofalo, head of the European Biodiesel Board (EBB), said the impact of Argentine imports was already worse than expected.
"There is huge economic damage and we risk seeing many European renewable fuel producers close down in the face of these unfair import floods," he said.
The EU is the world's largest producer and consumer of biodiesel, a fuel made mostly from vegetable oils, which is renewable and aimed at reducing carbon emissions.
EU production of biodiesel was 11.9 million tonnes in 2017, up from 11.7 million a year earlier. But consultancy Strategie Grains, which initially said output would be stable this year, has cut its 2018 estimate to 11.6 million tonnes because of the Argentine imports.
Imports of Argentine biodiesel into the EU could hit 1.5 million tonnes in 2018, with a similar volume from Indonesia if the EU cuts its duties, Strategie Grains said.
The rise in imports comes as several producers in the European Union are being pressed hard by internal competition and low margins.
The EU's top producer, Saipol, part of oilseed group Avril, said it would cut production by nearly half this year, with around 250 out of 600 staff working reduced hours, mainly because of imports of Argentine biodiesel.
"There is a double impact, on our sales but also on the biodiesel market, where prices are weighed down by the arrival of cheap products," Kristell Guizouarn, head of France's biodiesel industry group Esterifrance, said.
Both Argentina and Indonesia impose a higher export duty on the raw material - soybeans and palm oil respectively - than on biodiesel. This allows biodiesel producers in the two countries to "dump" products abroad at unfairly low prices, EU producers say.
Since September, European rapeseed oil-based biodiesel prices have fallen 12 percent but are still about 25 percent higher than Argentine soybean oil-based biodiesel delivered to the bloc.
The EU was Argentina's largest biodiesel market until the tariffs were implemented in 2013.
The Spanish biodiesel industry could be hard hit. There would be no need to produce the fuel in Spain if cheap biodiesel is available from Argentina, said Christophe Cogny, analyst at Strategie Grains, adding that Spanish companies were already facing severe overcapacity.
Germany, the EU's largest producing country, warned of a massive fall in output this year due to what it called unfairly subsidised imports.
"Immediate measures should be taken by the EU to restrain the imports in order to prevent this threat to the very existence of the German biodiesel industry," Elmar Baumann, head of the German Biofuels Industry Association VDB, said.
The EU opened an anti-subsidy investigation into Argentine biodiesel at the end of January, after a complaint by the EBB, potentially offering a way to impose duties on imported biodiesel.
Argentine producers accused the EU of protectionism.
"We are confident that we have a very clear and strong case to defend ourselves," said Luis Zubizarreta, president of Carbio, Argentina's biofuels industry chamber.
If the investigation finds that Argentina benefited from unfair subsidies, provisional duties could be imposed late this year. The scope of such duties is unknown.
In the meantime, pressured by the industry, France adopted stricter environmental rules for imported biofuels, a measure intended to restrict inflows from Argentina.
But since most shipments enter the EU via the Netherlands or Spain and are then distributed internally, it will be hard to track the impact of the French action.
The United States imposed steep duties on Argentine and Indonesian biodiesel last August, saying the fuel was unfairly subsidised. Argentine producers said the move meant an immediate halt in exports on the U.S. markets.
And last month the U.S. Commerce Department imposed more import duties on biodiesel from both countries, making it virtually certain that biodiesel from Argentina and Indonesia will not be sold in the U.S. market.
(Reporting by Sybille de La Hamaide in Paris, Hugh Bronstein, Maximilian Heath and Maximiliano Rizzi in Buenos Aires, Jose Elias Rodriguez in Madrid, Michael Hogan in Hamburg, Emily Chow in Kuala Lumpur and Fergus Jensen in Jakarta; Editing by Veronica Brown and Giles Elgood)