Brazil raises biodiesel blending mandate to 12% for 2023

The Brazilian government has raised national biodiesel blending mandate to 12% from the existing 10% from April 1 for 2023, the Ministry of Mines and Energy official release said on March 17.

The country's National Council for Energy Policy (CNPE) decided on March 17 that biodiesel mandate will be raised from the current 10% level (B10) to 12% (B12) from April with a progressive increase in mandates to B15 by 2026. The council noted that blending will be increased to B13 in April 2024, B14 in April 2025 and to B15 in April 2026.

According to market sources, the increase in blending mandate arrives on expected lines along with slightly lower than the continued recommendation of nation's biofuels association and other stakeholders. Multiple bodies such as Brazil's vegetable oils association (Abiove) and Brazil's biofuels producers' association (Aprobio) have been advocating from last year a blending mandate hike of as high as B15 for 2023-2024.

A soybean oil trader said "despite the push for biodiesel blending hike to B14-15, large part of market didn't believe that. The biodiesel supply chain especially automakers and road transport were not geared for much higher mandate. The market was already trading B12."

The decision is expected to push further domestic demand for biodiesel and related products, especially soybean oil which constituted 60%-70% of the biodiesel blending feedstock used to produce biodiesel in Brazil in 2022.

"The expected domestic increase in consumption of soybean oil with B12 is estimated around 720,000-800,000 mt," a vegetable oil analyst based out of USA said. "This is less likely to impact market in short term and can be expected as bearish news for some players who were expecting much higher mandate increase."

The analyst added "however, if supply crunch of raw soybean and its oil derivative further deteriorates from Argentina -- the world's largest supplier of soybean oil and meal, then this amount too could impact global supply chain in long term."

Brazil's national food supply agency CONAB has pegged 2022-23 soybean crush is estimated at 52.7 million mt. The soybean oil and soybean meal output was projected at 40.4 million mt and 10.8 million mt, respectively.

"This hike in blending mandate ushers much needed predictability for the biodiesel sector to intensify investments and puts Brazil in the pathway to lead global diesel decarbonisation efforts," Abiove said in a note immediately after the announcement.

Platts, part of S&P Global Commodity Insights, assessed Brazilian Biodiesel DAP Paulínia for one- to seven-delivery days at Real 4,880/cu m on March 17, down Real 65/cu m on the day.