S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
S&P Global Offerings
Featured Topics
Featured Products
Events
Solutions
Capabilities
Delivery Platforms
News & Research
Our Methodology
Methodology & Participation
Reference Tools
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Featured Events
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
S&P Global Offerings
S&P Global
Research & Insights
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
About Commodity Insights
Solutions
Capabilities
Delivery Platforms
News & Research
Our Methodology
Methodology & Participation
Reference Tools
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Featured Events
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
S&P Global Offerings
S&P Global
Research & Insights
S&P Global
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
About Commodity Insights
24 Mar 2023 | 16:13 UTC
Highlights
Feedstock volatility unsupportive of biofuels
Stronger EU mandates needed to boost biofuel growth
Current premiums deterring downstream customers
European feedstock volatility has stalled the supply growth of biofuels and resulted in high prices that have dampened demand for bio-diesel and bio-propane, according to fuel distributors in Europe.
Platts, a part of S&P Global Commodity Insights assessed the bio-propane market at $2,610.50/mt or a $2,082/mt premium to the conventional CIF NWE large cargo assessment on March 23. This was up from $2,583.25/mt or a $2,066/mt premium from the previous day but down from a $2,087/mt premium from the previous week.
The wide premium to conventional propane was a disincentive to demand, sources said.
While ICE LSGO front-month prices have closed the month near flat, biodiesel prices fell, narrowing premiums over gasoil for FAME 0 FOB ARA by $293.25/mt to $245.25/mt on the month to March 23, RME by $336.25/mt to $296.50/mt, and UCOME by $332.25/mt to $430.75/mt.
European biodiesel volatility has been linked to low diesel demand throughout the winter, as well as responses to macroeconomic uncertainty after the collapse of SVB bank in the US.
Feedstock prices have not reacted as quickly to weaker biofuel demand, but poor demand may start to sink through as traders and brokers have reported weak demand for UCO since the beginning of the year.
Platts assessed used cooking oil (UCO) at $1,114/mt March 23, which has been stable since March 14 where it fell from $1,145/mt on March 13. While hydrogen was assessed at $2,655.25/mt March 23, up around $74.14/mt on the previous day and lower by $43.72/mt from the previous week.
Recently, sources have noted a very quiet UCO market amid buying weakness. "No sales at all," he said. "With [biodiesel] prices still going down, even when I show offers below the market, buyers are not interested."
UCO is a feedstock for several bio-products in Europe, including the biodiesel UCOME, HVO or renewable diesel, sustainable aviation fuel, and bio-propane. The use of UCO is incentivized by the 2018 Renewable Energy Directive, as UCO is included as an Annex IX B feedstock, which allows member states to consider biofuels made from UCO for double counting towards mandates.
European market participants also identified imports of UCOME and feedstocks from Asia en route as contributing to low current demand.
When asked about lack of spot activity, a source said "a lot of big imports [are coming] direct from China," primarily of UCOME, which a second source agreed with. These flows may have been booked in advance, as sources in Asia continue to report a poor export market.
Though recent volatility in the related feedstocks has been pushing and pulling the bio-propane premium, sources pointed to limited supply and lack of policies across Europe to disincentivize demand from conventional LPG players.
LPG distributors said stronger EU policies are needed to bolster bio-propane growth and increased incentivizes for producers in order to boost supply levels.
With only a handful of bio-propane producers, and the large premiums against the propane complex, sources expect demand to remain subdued for the next several years.
The lack of subsidies across Europe has also deterred customers from paying the large premiums on bio-propane. While producers may "stand their ground" and await the petrochemical industry to pay such high premiums, downstream customers have seen little incentive to pay these high prices.
RTFCs provide subsidies for the UK transportation industry, for bio-propane's use as an autogas, however, its main use for heating across Europe has gained little traction across its main markets, including France or Germany, sources said.
Demand for bio-propylene in Europe has been weighed down by its premium price slow demand for downstream bio-chemicals or bio-polymers.
While interest by big brands to incorporate more sustainable feedstocks in their products has been on the rise, higher energy costs and inflation in recent months has curbed demand for relatively expensive bio-propylene.
"The conversation around bio has died in the current climate, with everyone focused on costs instead," a producer said.
In biodiesel, uncertainty about mandates can stall the market, with market participants questioning the future of double counting allowances for waste-based feedstocks and limits on the use of food-and-feed crops as feedstocks.
In February, the European Commission proposed higher heavy-duty vehicle emissions reduction targets that excluded biofuels as part of their vision for the future of decarbonization for commercial vehicles. On Feb. 14, industry members released a joint statement calling for renewable and low-carbon fuels, including biofuels, to be considered for compliance under the proposed standards.
Although analysts at S&P Global expect that "global biofuels and alternative liquids consumption will more than double by 2050," feedstock challenges and elevated costs are still hurdles that will be needed to be overcome in order to lift demand.