SRE Talk Shakes Confidence in US as India Shields Its Refiners

The first trading session of June opened on a tense note for the global biodiesel complex, with deteriorating economics, thin liquidity, and a sharp reset in trade flows driven by India’s fiscal policy. While European activity slowed into the holiday weekend, traders were digesting far more consequential developments out of Washington and New Delhi. In the U.S., D4 RINs collapsed to 95 cents on growing conviction that the White House is considering approval of long-stalled Small Refinery Exemptions (SREs)—a potential blow to the integrity of the Renewable Fuel Standard. Screen margins for biodiesel dropped to negative 58 cts/gal, effectively placing much of domestic discretionary production out of the money. https://www.reuters.com/sustainability/climate-energy/white-house-considers-plan-clear-record-backlog-small-refinery-biofuel-waivers-2025-05-29/

Meanwhile, the U.S. Department of Energy announced adjustments to its GREET model under 45Z, expanding carbon intensity scoring pathways. Yet these updates failed to clarify how credits will be valued or applied, especially with Congressional amendments still pending. Markets responded with skepticism rather than relief, highlighting how traders now view inconsistency and opacity in U.S. policy as material risks to the valuation of renewable fuel assets. The tone was further dampened by news that the DOE canceled over $3 billion in clean energy projects, a signal many read as a retreat from early-stage innovation.

In physical trading, the ARA window remained subdued. Only one deal was recorded for each of FAME 0, RME, and UCOME on Friday, with RME trading at $1,309/mt and holding a $40/mt premium over FAME 0, which dropped to $1,269/mt. UCOME slipped to $1,377/mt, maintaining a $108/mt premium, as interest in double-counted waste-based fuels persists even as margins vanish. SAF pricing also held firm, with HEFA-SPK quoted at $925/m³ FOB ARA, still reflecting a +$1,200/mt premium to fossil jet—though future investment remains uncertain in light of DOE program withdrawals.

Logistical conditions in Europe are mostly stable but showing signs of strain. The Rhine River is navigable from end to end, but low water levels in the central and northern stretches are forcing ships to load below capacity, increasing freight costs and limiting throughput efficiency. High water closures in southern Germany have been lifted, restoring full navigability, but if dry weather persists, inland logistics could become increasingly constrained through the summer. This is especially relevant for biodiesel feedstock and product flows between ARA and inland demand centers.

In contrast, India is taking bold and deliberate steps to support its domestic processing sector. The government slashed customs duties on crude vegetable oils from 27.5% to 16.5% while maintaining higher duties on refined oils—a classic protectionist move to safeguard local refiners. The policy shift has already jolted South American markets: FOB Paranaguá soyoil premiums for July firmed to –250 vs CBOT, reflecting a surge in expected Indian crude oil demand. The ripple effect is clear—when Western policy breeds uncertainty, Eastern markets like India respond with calculated control.