EU Boxes Out U.S. SAF but Not China, D4 Premiums Shrink, LCFS Nears $50

Despite a near 4% draw in ARA oil product stocks, ICE gasoil futures slid nearly 2% on the day. Traders point to lingering concerns over forward supply security rather than immediate inventory tightness. The announcement of a 19th EU sanctions package against Russia weighed further on sentiment, leaving European refiners increasingly anxious over diesel availability heading into Q4. The closure of Poland’s rail border with Belarus only deepens this unease, halting 90% of China–EU rail freight flows. The €25 billion corridor is a critical artery for bulk chemicals, and biodiesel producers are already feeling the strain. Flows of sodium hydroxide (caustic soda) and potassium hydroxide (potash lye), essential alkali catalysts for biodiesel production, have been disrupted, forcing ocean freight rerouting at significant premiums. Spot values for these inputs are reported 8–15% higher, with incremental logistics costs of €70–120/mt adding pressure on German, Dutch, and Polish plants. Just as damaging, the shutdown blocks European exports to China — from German machinery to automotive parts — undercutting one of Germany’s few remaining growth levers. If the impasse persists, weeks-long delays and higher costs risk cascading through both European imports and exports, amplifying the pressure on industrial output and chemical supply chains alike.

In Brussels, the European Commission has now formally extended anti-dumping and anti-subsidy duties on imports of HEFA SAF into Europe, closing a loophole that had previously allowed American renewable diesel and SAF producers access under separate classifications. The duties range from €211/mt up to €409/mt for US-origin products, effectively neutralizing the price advantage of US HEFA SAF in the EU market. Indonesia and Argentina also face new or extended subsidy duties on SAF. Yet in a striking contradiction, the very same Chinese plants that are already subject to EU duties on HVO remain able to ship SAF into Europe. Brussels has introduced dedicated customs codes to monitor these flows, but no tariffs have been imposed. This leaves what the European Biodiesel Board calls a “loophole,” allowing Chinese refiners to pivot production toward SAF to sidestep existing restrictions, even as US producers are boxed out by steep tariffs. The final caveat, however, is that Beijing itself controls the tap: China still reserves the right to issue export quotas that govern whether and how much SAF can actually flow to Europe.

European producers welcomed the clarification, though the broader investment picture remains clouded as Shell and BP have canceled major standalone SAF projects. Against this backdrop, the ARAG barge market saw a significant adjustment today, concentrated in RME and UCOME flows. Premiums remain above monthly averages, but spreads narrowed with the RME/UCOME differential marked at just $44/mt. Producers are visibly locking in RME’s extraordinary gross margin—estimated at $257/mt for October—as Dutch-origin rapeseed oil fell to €1,010/t ($1,192/mt) versus forward RME trades at $1,450/mt. The structure is notable, with rapeseed oil showing a €60/t contango from October to November, now trading at a discount of around €40/t to soybean oil along the curve. SAF values in the ARAG forward physical are firm at $2,697.21/mt, holding a $290/mt premium to HVOclass2, underpinned by tightening import policy and shifting sentiment.

Across the Atlantic, the U.S. market remains unsettled. D4 RINs continue to struggle, with the Dec-26 contract premium narrowing as compliance demand expectations weaken. Oversupply of biomass-based diesel has eroded the traditional D4/D6 spread, and traders are now questioning the forward curve’s ability to re-inflate without stronger policy signals. Political uncertainty compounds the picture: Congressional negotiations over a continuing resolution to fund the government beyond Oct 1 remain deadlocked, raising the prospect of an administrative slowdown that could delay key EPA and Treasury rulings on renewable fuel and 45Z guidance. Market participants note that the lack of clarity is feeding directly into weaker sentiment in the RIN complex.

Meanwhile, California’s LCFS credit prices have been in free fall, dropping from near $57/t in late August to just above $52/t CO₂ by Sept 19. Most RD producers continue to funnel volumes into the LCFS program, accelerating the credit glut. The market is now watching closely whether LCFS dips below the $50 threshold, widely seen as the point at which the program’s ability to drive incremental investment becomes seriously impaired. Pressure is compounded by recent policy moves, including the Governor’s approval of year-round E15 sales, which may shift some blending economics away from higher-credit fuels. Unless CARB signals a reform or tightening of the program, LCFS risks undermining its own decarbonization goals at a time when new renewable diesel capacity is still coming online.

Meanwhile in Asia, South Korea has released its SAF blending mandate roadmap. Obligations start at 1% in 2027, rising to 3–5% by 2030 and 7–10% by 2035. Compliance will fall on both refiners and airlines, with penalties set at 1.5x the shortfall market value—lower than Europe’s 2x multiplier. The government plans to back mandates with fiscal measures including tax credits, R&D subsidies, and passenger “green contribution” schemes. The clarity provides Asia’s first long-term SAF mandate pathway, a landmark step that will ripple across the region’s refining and aviation industries.

Finally, on a personal note, I will be attending the North American SAF Conference & Expo in Minneapolis next week (Sept 22–24). With policymakers, producers, and airlines gathering, it will be an important venue to gauge how North America positions itself in the fast-shifting global SAF landscape.