China Retaliation Deepens Trade Rift as Biodiesel Premiums Slip

Happy Columbus Day, everyone! While Washington appears to signal a thaw in U.S.–China trade rhetoric, Beijing’s retaliatory move under USTR Section 301 will take effect tomorrow and could ripple far beyond container freight. China’s new port fees—starting at $56/t and rising to $157/t by 2028—will apply to any vessel with 25 percent or more U.S. ownership, directly targeting fleets of U.S.-listed owners such as ZIM and Matson. Analysts warn this “wide-net” rule could ensnare dozens of tankers and bulkers indirectly owned through U.S. funds, tightening available tonnage to China and raising freight rates. The U.S., preoccupied with rare-earth supply chains, has so far avoided confronting the measure head-on, while Beijing’s anger over the forced seizure of Nexperia in the Netherlands adds more fuel to the fire. With the Five-Year Plenum set to begin later this month, Chinese negotiators are unlikely to show flexibility in the near term.

It is worth noting that the original Section 301 measures by the USTR have already managed to effectively cut COSCO Shipping out of U.S. ports, reshaping long-haul container trade patterns and limiting Chinese carriers’ direct access to the American market. Beijing’s new port fee retaliation appears to be a direct response to that exclusion, adding another layer of complexity to transpacific logistics.

Meanwhile, the U.S. government shutdown remains unresolved, leaving RIN traders directionless. D4 biomass-based diesel RINs were last seen at $1.033/gal for December 2025 futures, still range-bound as participants await clarity on fiscal negotiations and possible EPA actions. Market sentiment remains cautious, with muted speculative interest and thin trade volumes.

On the logistics side, Mississippi River levels have again turned critical, threatening grain movement just as the U.S. harvest crosses the 50 percent threshold. The St. Louis gauge sits at only 0.13 feet, effectively at the navigational minimum, with NOAA forecasting minimal improvement through next week. The ultra-low stage is constraining barge traffic and inflating freight rates, particularly for soybean and corn shipments to the Gulf, leading to rising basis levels and delayed soy-oil deliveries to crushers and exporters.

Adding to this, LCFS carbon credit prices in California remain stuck in the mid-$50s per ton of CO₂, far below last year’s highs near $80. While weak by historical standards, these credits remain the saving grace of the renewable diesel industry, keeping margins positive for refiners supplying California despite the absence of 45Z guidance. The lack of federal clarity has kept many producers cautious, redirecting volumes toward West Coast compliance markets where LCFS support remains intact.

In Europe, the rapeseed–soyoil relationship inverted today, with rapeseed oil briefly trading above soyoil in the front month but slipping below it further out, signaling price pressure into early 2026. Dutch rapeseed oil for Nov–Jan was quoted around €1,095/t FOB versus €1,080/t for soyoil, but later positions are €10–20/t lower. Much of the pressure stems from abundant upstream supplies: Canada’s canola yields are 27 percent above last year, lifting output to 21 million tons, and Australia’s crop has been revised up to 6.85 million tons. Together these figures suggest Europe could see substantial canola imports this winter from both origins, further weighing on rapeseed oil values and spreads.

Meanwhile, the Kaub gauge on the Rhine is holding near 1.66–1.67 meters, above the critical low-water mark but still forcing barges to operate at reduced draft. Light loading and surcharges continue to affect rapeseed and meal flows into inland crushers, compounding downward pressure on RSO prices and prompting heavy producer selling in today’s ARAG window while gross margins were still near $152/mt.

RME traded down to +721 $/t over ICE gasoil before settling at +729 $/t (Friday +749), with ICE gasoil firm around $660/t, up 1 percent. FAME 0 fell to $1,474/t fob ARA, with RME/FAME at $74/t. UCOME eased to $1,479/t, widening its RME spread to $86/t as UCO fob ARA held near $1,250/t. Forward BOGO (Bean Oil/Gasoil) for December firmed slightly to +464 $/t, while BOPO (Bean Oil/Palm Oil) narrowed modestly as palm steadied. HVO Class II closed Friday at $2,592/t, about $1,885/t over gasoil, while SAF fob ARA slipped $27/t to $2,706/t, still backwardated into December on tight prompt availability.

Between the unresolved U.S. shutdown, river bottlenecks on the Mississippi and Rhine, China’s escalating trade retaliation, and record canola harvests in Canada and Australia, biofuel markets are navigating a storm of physical and policy cross-currents. Ample feedstock supply may soften European veg-oil prices further, but LCFS credits and steady California demand remain the industry’s safety net for now.