InfoSAWIT, KUALA LUMPUR – Global biofuel production is facing significant challenges due to a slowdown in the collection of used and waste oils in 2024. This is predicted to lead to an increasing deficit in 2025 and 2026. Artem Hammerschmidt, Head of Vegoils and Biofuels Research at Ceras Analytics, shared this insight during his presentation at the 36th Palm and Lauric Oils Price Outlook Conference in Kuala Lumpur on February 26, 2025.
According to Hammerschmidt, policy remains the main driver of biofuel demand and global production. Ambitious decarbonization targets, particularly in Europe, Indonesia, and the United States, have spurred demand for biodiesel, renewable diesel (HVO), and sustainable aviation fuel (SAF), which is expected to increase by up to 8 million tons during the 2025-2026 period.
Europe: Dependence on Waste Oil
In the UK and Europe, the demand for biofuels in the aviation and maritime sectors has surged. Strict policies limit the use of feedstock to only waste and advanced raw materials for SAF and maritime biodiesel/HVO production. The total demand for biodiesel/HVO/SAF for land, air, and sea transport is projected to rise by 2.5 million tons this year, with an additional 1.3 million tons by 2026.
However, this growing demand raises a significant question: can Europe secure enough waste oil supply to meet these needs? Meanwhile, increased imports of HVO/SAF have managed to offset much of the decline in biodiesel entering the European market.
On the other hand, changes in subsidy policies in the United States have also affected the competitiveness of European biodiesel in the US market. European biodiesel/HVO/SAF production is expected to increase by 2.1 million tons in 2025, with an additional 0.7 million tons the following year.
United States: Impact of Subsidy Policies
The shift in subsidy policy from "blender’s subsidy" to "producer’s subsidy" in January 2025 has shaken the US biofuel sector. Biodiesel and its derivatives production is expected to drop by up to 15% in the first quarter of 2025, while imports plummeted in January and February.
This production decline has led to an increase in Renewable Identification Number (RIN) prices, although production margins have begun to recover from early 2025 lows. It is anticipated that RIN stocks in the US will turn negative by the end of 2025 and continue to decline in 2026, potentially driving RIN prices higher in the coming months.
The energy policy changes that the next US administration may implement, especially if there is a change in leadership, will also be a factor influencing the US biofuel industry. Biodiesel/HVO/SAF production is expected to rebound from a decline of 0.1 million tons in 2025 to a growth of 1.6 million tons in 2026.
Additionally, demand for soybean oil and used oil as feedstock is predicted to rise significantly. Soybean oil prices may also increase, especially if the US imposes more restrictions on vegetable oil and fat imports.
With the rising global demand for biofuels and limited raw material supply, the industry faces significant challenges in balancing production growth with the availability of sustainable feedstock. Countries with high decarbonization targets must seek innovative solutions in waste oil management and diversify raw material sources to meet clean energy needs without compromising environmental sustainability. (T2)
