Viewpoint: European HVO demand to rise in 2025

: Biofuels
24/12/23

European demand for hydrotreated vegetable oil (HVO), or renewable diesel, will be supported in 2025 by a combination of higher mandates for the use of renewables in transport, and by changes to EU member state regulations on the carryover of renewable fuels tickets, like in Germany and the Netherlands.

European HVO production could grow by more than 400,000t in 2025, if announced projects are completed in time. Most new plants have the flexibility to switch to sustainable aviation fuel (SAF) production, in the form of hydrotreated esters and fatty acids synthesised paraffinic kerosene (HEFA-SPK).

But those seeking to import HVO into the EU will face barriers. Definitive EU anti-dumping duties (ADDs) on Chinese biodiesel and HVO will be imposed by mid-February, and anti-dumping and anti-subsidy duties are already in place for HVO and biodiesel of US and Canadian origin.

Flows of US-origin HVO to the UK are unimpeded as transposed EU duties were removed in 2022.

A clean slate...

Against a headwind of gradually shrinking diesel demand, national transport renewables mandates are increasing. These ambitions rise again under the next iteration of the EU's Renewable Energy Directive (RED III), for which member states face a May 2025 transposition deadline.

Optimism in the biofuels markets will be tempered by experiences in 2024. The low value of renewable fuel tickets — tradeable credits generated primarily by the sale of biofuel-blended fuels — in major European demand centres has weighed on supplier appetite for physical biofuels.

This includes the relatively expensive HVO that can be blended in much greater volumes than cheaper fatty acid methyl esters (Fame). A portion of these tradeable tickets can usually be carried over from one obligation year to the next — as was done from 2023-24 — extending pressure on physical biofuel demand.

But Germany has approved a law removing the option for companies to carry over excess 2024 greenhouse gas (GHG) certificates through both 2025 and 2026, aimed at resetting the outlook for physical renewables demand. Obligated parties will need start from scratch to meet their annual GHG savings targets — at 10.6pc for 2025 and 12.1pc for 2026 — resulting in greater demand for physical biofuels including HVO.

In the Netherlands, the tickets carryover will be reduced from 25pc to 10pc for companies with an annual blending obligation.

...follows volatility

Prompt HVO assessments firmed significantly late in 2024 — albeit from long-term lows — driven by short-term demand in the Netherlands at a time of tight regional supply.

HVO (Class II) fob ARA range, a European benchmark based on HVO produced from used cooking oil (UCO), peaked at $1,500/m³ as a premium to escalated gasoil by 14 November — or a 122pc increase from the start of October — equating to $2,652.91/t on an outright basis.

Assessments then fell back to a $860/m³ premium a week later, when the market rebalanced as suppliers looked to reroute prompt volumes.

Before the rise, prices had hovered around historically soft levels for a sustained period. Sweden's decision to slash its GHG emissions mandate for the 2024-26 period due to fuel price concerns, and the low ticket prices have kept a lid on values.

The HVO (Class II) outright price averaged around $1,625/t over 1 January-31 October 2024, down by around $580/t compared with the same period of 2023.

While fundamentals now point to growth in European HVO use, the futures curve is backwardated. Those in the market may yet take a position that aligns with this viewpoint, but recent volatility has stunted forward trade.

By Toby Shay

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

25/06/10

Brazil inflation eases to 5.32pc in May

Sao Paulo, 10 June (Argus) — Brazil's inflation slowed to an annual 5.32pc in May, snapping a three-month upswing since February, according to government statistics agency IBGE. The country's annualized inflation slowed from 5.53pc in April but was up from 4.56pc in January. Shelter costs, which include utilities, posted the largest gain in May, rising to an annual 4.53pc from 4pc in April. The acceleration took place thanks to a federal increase in power tariffs last month because of dry weather hampering hydroelectric power generation, which is Brazil's main power source. Transportation costs decelerated to 4.64pc in May from 5.49pc in April, in part driven by an annualized 13.16pc contraction in airplane tickets. Motor fuels also decelerated to 7.95pc in May from a 9.23pc gain in the month prior. Gasoline, ethanol, diesel and compressed natural gas (CNG) prices all fell in May, following some readjustments by state-controlled Petrobras . Food and beverage costs slowed to an annual 7.33pc in May from 7.81pc in April. Soybean oil prices eased to 21.1pc from 22.83pc. Brazil's monthly inflation slowed to 0.26pc in May from 0.43pc in April. That is the third monthly decline and the lowest rate since January. The country's decelerating inflation is partially thanks to the central bank's course of tightening, hiking its target rate to 14.75pc in early May. That was the sixth increase in a row since September, aimed at cooling the economy and boosting the real currency following sharp depreciation last year. By Maria Frazatto Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

EU–IMO overlap could incentivize biofuel demand

25/06/10

EU–IMO overlap could incentivize biofuel demand

New York, 10 June (Argus) — The EU and the International Maritime Organization's (IMO) dual efforts to cut shipping emissions could lead to stacked fines and higher fuel costs for ships visiting EU ports, but it could also sharpen incentives to use biodiesel blends. The EU's FuelEU Maritime and emissions trading system (ETS) is already in force within EU territory, while the IMO's global greenhouse gas (GHG) penalty system takes effect in 2028 and applies to EU waters, among other regions. Without coordination, ships operating in and out of EU waters that exceed both sets of limits could pay under both systems. FuelEU targets vessel pools, while IMO rules will be applied on an individual vessel basis. Both cover lifecycle GHG emissions, but IMO's thresholds are stricter ( see chart ). FuelEU penalties are currently €2,400/t of VLSFO energy equivalent ($2,708/t in May). From 2028, IMO penalties will range from $100/t CO₂ e for breaching the direct GHG limit to $380/t for surpassing the base threshold. On top of this, the EU ETS will require shipowners to pay for 100pc of CO₂ emissions from combustion in EU waters starting in 2026. In May 2025, Rotterdam high-sulphur fuel oil (HSFO) averaged $415/t and ETS carbon credits averaged $79/t. Since VLSFO emits 3.114t of CO₂ per tonne burned, ETS alone would add $246/t for 100pc CO₂ charge. If a vessel also breaches FuelEU and IMO limits, it would face another $71/t and $82/t, respectively, bringing the total penalty burden to $399/t and the effective HSFO price to $814/t in 2028 ( see chart ). A comparable ship operating only in Asia would pay $497/t, factoring in IMO penalties alone. In May,northwest Europe B30 biodiesel — a used cooking oil methyl ester and very low-sulphur fuel oil blend — averaged $790/t. Considering a $173/t CO₂ EU ETS emissions cost that covers 100pc of emissions from combustion, and $25/t IMO overcompliance credit in 2028, the B30 price would be $938/t, a premium to HSFO. But by 2030, the combined effect of IMO and EU penalties plus overcompliance credits would flip B30 to a discount for EU-bound ships. Outside EU waters, IMO alone would not tip the balance. The overlapping rules are likely to prompt shipowners to concentrate low-carbon fuel use in EU waters, shifting the bulk of global shipping emissions reductions to the North Sea, Baltic Sea, Mediterranean, and northeast Atlantic, leaving the Pacific, Indian, Arctic, and western Atlantic regions with less progress. "The [European] Commission will assess the new global measure to see how it interacts with current EU maritime-related regulations, maintaining environmental integrity while avoiding significant double burden", it said in a statement in April. The EU has two and a half years until 2028 to make a decision. By Stefka Wechsler FuelEU and IMO well-to-wake GHG Intensity gCO2e/MJ NW Europe bunkers with IMO and EU penalties $/t Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Jones Act rates unaffected by Trump ship talk

25/06/06

Jones Act rates unaffected by Trump ship talk

New York, 6 June (Argus) — Freight rates for the Jones Act fleet of US-built and crewed vessels that transport oil and other liquids between US ports have responded little to US government shakeups in 2025. The rate for a Houston, Texas-Port Everglades, Florida voyage on a Jones Act medium range (MR) tanker dropped by 8¢/bl to $3.29/bl between 3 January and 30 May per Argus assessments, down by only 2.3pc in that time despite US president Donald Trump's February announcement to bolster US shipbuilding . Trump has expressed a desire to boost US shipbuilding, while shorter-term remedies to an aging US-flagged fleet could come in the form of converting foreign-flagged vessels rather than building new ships domestically . The cost to build an MR tanker at a US shipyard is about $210mn,compared with $50mn to build the same vessel in South Korea, according to Macquarie Bank. Vessels re-flagged in the US are eligible for US government contracts, such as Military Sealift Command loadings, alongside other support programs extended by the US to vessels flying its flag. But they do not meet all the requirements to join the Jones Act fleet shipping between US ports, specifically the US-built requirement. A lack of newbuilding activity has helped keep $/d rates elevated for the less than 50 Jones Act MR tankers that are typically under multi-year time charter contracts. Jones Act $/d rates have remained rangebound since the start of the year between $86,000/d and $91,000/d per Argus assessments, an order of magnitude higher than the $8,952/d averaged by internationally flagged MR tankers carrying refined products like diesel from the US Gulf coast to Pozos, Colombia in the same period. Most of the downward pressure on Jones Act rates in 2025 likely came from declining crude prices amid roiling market uncertainty surrounding on-again and off-again US tariffs. The response from shippers involved with the Jones Act fleet has been "more skepticism rather than optimism" and there had not been "any serious reaction by the market to the administrative initiatives", according to a Jones Act shipowner. "There has been a push to ease the re-flagging of foreign built vessels into the US flag fleet, but of course these will not be Jones Act vessels and their introduction to US flag does not benefit the domestic shipyards which is the co-ultimate target, that and labor," the contact told Argus . "The shortage of US mariners is, of course, another important issue as well that will have to be wrestled with." By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Biofuels investment to rise 13pc in 2025: IEA

25/06/05

Biofuels investment to rise 13pc in 2025: IEA

London, 5 June (Argus) — Global investment in biofuels is set to grow by 13pc in 2025 to more than $16bn, as part of a broader surge in low-emissions fuel spending, according to the IEA. The IEA's World Energy Investment report projects a 30pc year-on-year increase in total investment in low-emissions fuels — including biofuels, biogases and low-emissions hydrogen — reaching nearly $25bn this year. This follows a 20pc rise in 2024. But regional trends diverge. Europe leads in overall spending but is prioritising biogas over liquid biofuels such as biodiesel, ethanol and biogenic sustainable aviation fuel (SAF). The region accounted for 60pc of global biogas investment last year but lagged behind the US, China and Brazil in liquid biofuels. The US and Brazil dominate biodiesel and ethanol investment. Their spending is several times higher than in Europe. Brazil's role is expected to expand further following its Fuels of the Future bill, which was signed into law last year . The US is also driving growth in hydrotreated vegetable oil (HVO) and SAF. It accounts for half of the 40pc projected increase in HVO and SAF output this year, which the IEA expects to reach 800,000 b/d. In 2024, the US made up 70pc of global SAF investment. The IEA forecasts fossil fuel investment will decline in 2025 for the first time since 2020. This will lift the share of low-emissions fuels — including biofuels — in global energy investment, although they will still account for only around 3pc of the total. By Simone Burgin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Alcohol-to-jet stuck on runway as US policy shifts

25/06/04

Alcohol-to-jet stuck on runway as US policy shifts

New York, 4 June (Argus) — Proposed changes to a US clean fuel tax credit may be a boon for farmers, but a future where ethanol is a major ingredient in jet fuel remains far off. The massive Republican budget bill currently advancing through Congress would extend the "45Z" credit, which offers larger subsidies to fuels as they produce fewer emissions. The proposal too would bar regulators from weighing indirect land use impacts , effectively upping subsidies for crop-based fuels like ethanol, in a win for agribusiness. Farm groups have hoped that such changes could open the growing sustainable aviation fuel (SAF) market to ethanol producers, otherwise at risk from an increasingly efficient and electric US vehicle fleet. Airlines too are eager for more diverse SAF sources since the main pathway nowadays, processing vegetable oils and animal fats, draws from more limited feedstocks. United Airlines government affairs director Tom Michels said at an OurEnergyPolicy forum earlier this year that the company hopes ethanol-based fuel "could fulfill around a quarter of our future SAF needs." But incentives in law and under the proposal, which passed the House last month, would do little to boost "alcohol-to-jet" output. While ethanol typically trades at a discount to gasoline, SAF is substantially more expensive than petroleum, making government support essential for uptake. The Republican caucus has a range of views, with clean energy advocates wary of phasing out subsidies, farm-state representatives intent on boosting biofuels, and conservatives committed to curbing government spending. Republicans plan to use a process called reconciliation that allows them to pass the bill without Democratic support. How policymakers implement 45Z will be crucial for a wave of alcohol-to-jet startups eyeing production this decade. That includes Gevo, whose plans for an integrated 60mn USG/yr plant in South Dakota are complicated by another company's struggles starting an interstate carbon pipeline. Meanwhile, people familiar with the matter say that LanzaJet's 10mn USG/yr alcohol-to-jet pilot project in Georgia — which opened last year but is not yet fully operational — is not currently producing any SAF. "The suite of policies we would need to make ethanol-to-jet pencil out just does not exist right now," said Brian Jennings, chief executive of the American Coalition for Ethanol. RINs wear thin Ethanol-based SAF would likely still produce too many emissions to claim any 45Z subsidy even if the proposed emissions tracking changes took effect — since the pathway requires more energy-intensive processing to make fuel suitable for jet engines. Carbon capture could make up the difference, though few facilities have that capability. The lack of subsidy would compound barriers from the Renewable Fuel Standard, which requires oil refiners to blend biofuels or buy credits from those who do. Under the program, blending corn ethanol earns a Renewable Identification Number (RIN) credit, but there is no certified pathway yet to offer RINs for corn-based SAF blending. Even if there were, advanced biofuel credits have traded recently at only a slight premium, reducing the incentive for ethanol producers to eye new markets. Argus last assessed current year D4 biomass-based diesel credits at 92.25¢/RIN and D6 conventional credits at 86.50¢/RIN, and they traded at parity much of last year. Meanwhile, the typical US dry mill ethanol producer would likely qualify for some 45Z subsidy if the Republican bill passed, adding to RIN benefits. Those plants would have to forgo both incentives to sell to SAF makers. It is unclear how producers of a more-expensive and less-subsidized SAF could compete on price. Gevo chief executive Patrick Gruber said that his company's integrated model — producing ethanol and SAF at the same sites — is less risky than buying ethanol from elsewhere. But there are other policy headwinds. A new South Dakota law to restrict eminent domain could derail Summit Carbon's planned multistate carbon pipeline, which dozens of biorefineries, including one Gevo facility, want to join. Gevo has purchased a North Dakota biorefinery that can already capture carbon on site, a potentially lucrative workaround to pipeline delays, and is eyeing SAF production there too. There is a RIN pathway for SAF from Brazilian sugarcane ethanol — a model that LanzaJet has pursued — but credit pricing makes economics challenging there too, adding to freight and tariff costs . Even then, the bill to change 45Z would restrict eligibility to North American feedstocks, upending LanzaJet's plans for Brazilian ethanol without making US alternatives more economical. "45Z as currently drafted creates a disincentive for US ethanol to be used in SAF," said LanzaJet vice president of government and regulatory affairs Angela Foster-Rice. "We are hopeful to get this issue addressed in the Senate bill." Despite policy uncertainty, airlines have committed to procuring far more SAF and might be willing to pay a premium. But they are more likely to pay up for fuel they can at least use for SAF mandates in the EU and UK, which do not credit fuels from first-generation crops. US federal and state programs subsidize lower-carbon jet fuels but do not mandate usage. The floor is yours The Republican bill is still just a proposal, leaving the possibility for changes. The Senate reconvened this week with a goal of passing the bill before 4 July, and members have signaled they might take a different approach to clean energy subsidies than the House. Some biofuel lobbyists support shifting rules to benefit SAF — potentially by providing a higher "floor" credit for refiners that barely qualify or allowing alcohol-to-jet producers to claim the same benefit as upstream ethanol refiners. Under current rules, fuels may earn just cents per gallon. But such changes could rile trucking groups frustrated with 45Z already offering heftier subsidies to SAF and deficit hawks worried about the bill's mounting costs. By Cole Martin and Matthew Cope Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more