SAF Premiums Explode While Europe Closes the Door on UCOME

Biodiesel and renewable diesel markets saw a surge in physical activity this week, with nearly 18kt reported transacted in the window — the most active session in over two weeks. Spot trading in Fame 0 ranged from +$665 to +$675/t over ICE Gasoil, assessed at $667.50/t. RME was active between +$681–688/t and settled around +$684/t, while UCOME traded from +$767 to +$772/t, with an average near +$770/t. Despite weaker gasoil futures, outright biodiesel prices held firm, suggesting tight selling interest and underlying demand resilience.

Hydrotreated Vegetable Oil (HVO) values rose sharply by $128/t to $2,028/t, while Sustainable Aviation Fuel (SAF) gained $46/t to reach $2,232/t — the highest level of the year. Premiums over ICE gasoil now exceed $1,475/t. Yet traders increasingly question whether the SAF supply shortage is genuine. Given the ease of co-processing HEFA-SPK in European refineries, the absence of incremental supply ahead of RefuelEU mandates is being interpreted by some as deliberate withholding — a textbook case of controlled scarcity aimed at extracting maximum premium.

At the same time, a regulatory divergence is distorting marine biodiesel economics. Belgium and the Netherlands are implementing RED III in a way that excludes UCOME and animal fats (Annex IX Part B) from maritime compliance mechanisms. This contradicts FuelEU Maritime rules, which do permit these fuels. As a result, no GHG credits will be awarded for UCOME-based bunkers in these countries starting in 2026, sharply reducing their commercial viability.

Fuel EU Vs RED III Maritime Mandates

Soft oil prices continue to reflect subdued sentiment. Dutch soy oil for Aug–Oct was offered at $1,135–1,125/t FOB, down $10/t. Rapeseed oil dropped to €1,021/t for Aug–Jan, while sunflower oil held steady at $1,245/t FOB NWE for September. Ukrainian soybean exports into Europe are rising sharply, pressuring meal and contributing to weaker local crush margins. If ceasefire negotiations—rumored to be progressing with a potential Trump–Putin summit as early as next week—gain traction, freight and Black Sea oilseed flows could shift rapidly as the US pulls away Russia sanctions. Better be hedged accordingly for that option.

D4 RINs remain stagnant, showing little reaction to feedstock or diesel market movements. Biodiesel screen crush margins improved slightly to -$0.41/gal, based on soybean oil, ULSD, and RIN values. These calculations remain in negative territory and do not yet reflect upside from 45Z tax credits, LCFS, or state incentives — suggesting ongoing margin pressure for independent producers.

D4 RINs

Soybean crush margins — referring to whole bean processing into meal and oil — have surged above $2.25/bu on screen. However, ADM reported a 75% year-on-year collapse in actual crushing profitability. This disconnect is attributed to weak soymeal demand, depressed soyoil prices earlier in Q2, and lower plant utilization. Theoretical models may suggest healthy returns, but real-world conditions continue to strain processor economics.

China’s July trade data surprised analysts with a 7.2% year-on-year increase in exports and a 4.1% rise in imports. Despite a steep decline in U.S.-bound trade, flows to ASEAN and European destinations remained firm. The year-to-date surplus reached $683.5 billion — up 32%. These figures suggest regional demand remains intact and may support near-term biodiesel and vegoil flows.

China July Exports

In Asia’s biodiesel complex, UCOME FOB Straits fell to $1,240–1,250/t amid muted demand, while feedstock costs remain elevated. Chinese UCO firmed slightly on local industrial use. Palm oil continues to trade defensively, with Malaysian production up 9% in July, though early August data from SPPOMA showed a 17% drop versus the prior month’s start. Market direction remains sensitive to further supply and policy signals from Indonesia and India.