Markets Disjointed as UCOME Drops Despite Feedstock Rally; USTR Shipping Proposal Emerges as Major Threat

Today’s UCOME activity in the Northwest Europe barge market saw unusually high volumes, but the flat price dropped $20/mt to $1,537/mt. The move was driven by a narrowing premium over gasoil, which surprised many traders given the strength in soybean oil and the widening BOGO spread, now nearing +$400/mt. While UCOME prices are normally responsive to feedstock costs and diesel benchmarks, today’s decline seems more about regulatory recalibration—specifically, the market digesting rising risk that double counting could be scaled back or removed under future EU revisions to Annex IX.

Across the Atlantic, U.S. vegoil markets rallied sharply on growing optimism surrounding renewable fuel policy. Soyoil futures surged nearly 5%, lifting biofuel-related indicators such as D4 RINs, which rose to $1.035/gal. Traders are increasingly confident that the EPA may raise RVOs through administrative action in the coming weeks, with rumors of biomass-based diesel targets potentially climbing well above current levels. However, the excitement around a potential BTC extension should be tempered by the reality that only 49 Congressional workdays remain between now and September 1, making legislative action difficult under current conditions.

Even with stronger RIN values, producers in the U.S. continue to face negative margins, as feedstock prices have outpaced the compliance value rebound. The current structure leaves many in the U.S. biodiesel and renewable diesel sectors operating in the red. More importantly, the rising RINs are once again straining the already fragile alliance between agriculture and refining. While the White House has encouraged talks between Big Oil and the Farm Belt, higher compliance costs will not sit well with independent refiners, many of whom have already warned that aggressive RFS mandates could threaten union jobs and raise fuel prices at the pump. This could make near-term policy coordination politically challenging, especially as the election cycle heats up.

Amid these visible price and policy shifts, a major threat is quietly developing that could deeply disrupt global biofuel logistics: the USTR is considering a shipping proposal that would impose steep fees—up to $3.5 million per port call—on Chinese-built or Chinese-operated vessels. Given that roughly 83% of container ships calling on U.S. ports last year were built in China, the scale of impact is massive. The policy would also push for increasing percentages of U.S. exports to be moved on U.S.-flagged vessels, starting at 1% and growing to 15% over seven years. This would effectively rewrite global freight economics for liquid bulk cargoes like biodiesel, renewable diesel, ethanol, and feedstocks.

If implemented, the result could be materially higher shipping costs for both imports and exports, diminished competitiveness for U.S. biofuel in global markets, and fewer arbitrage opportunities for international traders. The industry must now navigate three major policy fronts simultaneously: EPA-driven RVO revisions, EU sustainability criteria reform, and a potential U.S. overhaul of maritime trade rules. While markets may be focused on the short-term noise around feedstocks and RINs, the structural implications of the USTR shipping plan deserve far more attention than they are currently receiving.