US biodiesel producers are facing increasingly challenging economic conditions as screen crush margins have plummeted to negative 34 cents per gallon. For plants located away from the Midwest, particularly those on the Gulf Coast, margins could be an additional 20-30 cents per gallon worse depending on freight spreads. The situation underscores the growing pressure on domestic biofuel producers as they navigate volatile feedstock costs and uncertain regulatory environments. The only saving grace appears to be RIN prices, which have now reversed their recent decline and climbed to 82 cents per gallon as market participants dismiss what appears to have been an error in the EPA's EMTS data that had previously sparked concerns.
In stark contrast to the US market, European biodiesel producers, particularly in the Amsterdam-Rotterdam-Antwerp (ARAG) region, experienced a relatively active trading session with RME gross margins specifically widening to approximately $175 per metric ton. This improvement is especially notable for Rapeseed Methyl Ester (RME) producers, who have benefited from a significant drop in Rapeseed Oil (RSO) values. A key factor driving the widening RME margins is the seasonal transition away from winter conditions, which has substantially reduced demand for RME's superior cold weather properties. As a result, RME must now price competitively against summer-grade biodiesel (F0) to remain attractive in the market. Meanwhile, RSO has become the cheapest soft oil available in the European market – an unusual market dynamic but not entirely surprising given the substantial Australian rapeseed imports recorded in January. As of February 23, total EU imports of rapeseed for the 2024/25 season had reached 4.23 million metric tons, contributing to the downward pressure on RSO prices.
The European market dynamics are further reflected in the F0 contract, which is now trading at a flat price of $1,227 per metric ton, representing a gross margin of $93 per metric ton. This pricing structure indicates that despite overall challenging conditions for biofuel producers globally, European operators are finding some breathing room through feedstock price adjustments. The significant drop in European rapeseed oil prices has created unusual market conditions where RSO is now the cheapest soft oil available in the region and may trigger an adjustment in Soyoil values as well. Again, RSO is normally used by the bio sector for winter biodiesel, while soybean oil and other feedstocks are used for summer grade. We are seeing further exports of Soyoil from the US, which may be related to bio processing in Europe as you must use US Soyoil to generate RINs, and traders may be banking, like me, on much higher D4 RINs values because of 45z uncertainties.
In the higher-value biofuel segments, Sustainable Aviation Fuel (SAF) prices continue to maintain a slight premium over second-class Hydrotreated Vegetable Oil (HVO), with SAF trading at $1,770 per metric ton while HVO class 2 is at $1,705 per metric ton. This price differential reflects the steady demand for aviation biofuels within the EU as airlines face increasing pressure to meet the mandate and reduce their carbon footprint, despite the higher production costs associated with SAF. The premium persists even as overall SAF co-processing capacity in Europe has increased and that China SAF remains excluded from CVD (Countervailing duties) in Europe.
Looking ahead, market participants are closely monitoring potential policy developments, especially regarding US tariffs on imports from Canada, Mexico, and China, which could significantly alter supply chains for used cooking oils and other waste-based feedstocks. As noted in recent industry reports, these trade disruptions could lead to the diversion of UCO exports from the USA to the EU, requiring heightened monitoring of feedstock flows. Additionally, the biodiesel industry is awaiting the draft amendment to the Federal Immission Control Act expected from the new German government in spring 2025, which will transpose the amended Renewable Energy Directive (RED III) into national law and could potentially remove the double counting provisions that have contributed to the current market imbalances.
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