Barclays sees improved biofuel market fundamentals

Investing.com -- Barclays reported that biofuel markets are entering a more constructive phase, driven by regulation-based demand growth across major regions and controlled supply expansion.

Neste delivered a second-quarter renewable products margin of $1,223 per ton, exceeding expectations and marking a record high. Vara consensus as of Monday projects a third-quarter renewable products margin of $1,050 per ton, indicating continued strong margins.

The European Union is reviewing biodiesel trade policy on two fronts. Regulators are evaluating whether sustainable aviation fuel should be exempt from anti-dumping and countervailing duties on US biofuels. They are also considering extending existing duties on renewable diesel and sustainable aviation fuel for five more years.

Valero and Darling Ingredients argue that Europe lacks sufficient sustainable aviation fuel supply to meet ReFuelEU mandates, which require 2% in 2025 and 6% by 2030. The European Biodiesel Board warns that removing duties could lead to increased US imports supported by tax credits up to $1 per gallon, potentially harming EU producers.

Spain has changed its biofuel policy from volume-based mandates to greenhouse gas reduction targets. Road fuel suppliers must cut emissions by 8.5% in 2027, rising to 17.6% by 2030 and 30% by 2040. The framework also eliminates double-counting incentives for waste-based fuels, increasing the physical volumes of renewable fuels needed for compliance.

European and US biofuel producers reported strong second-quarter margins as market conditions tightened. Management commentary indicated a constructive outlook supported by policy clarity through at least 2027.

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