The mandated demand for renewables under the latest iteration of the Renewable Energy Directive (RED III) necessitates the production of advanced products such as renewable diesel, as this updated directive enables suppliers to blfinish beyond the existing B7 limits*. A similar situation is occurring for sustainable aviation fuel, where a growing share of jet fuel sales must be built from renewable sources. This continued increase in demand for renewables across all transport sectors, spearheaded by biofuels, is creating a feedstock supply crunch.
As hydrotreating biofuel producers see to gather the materials requireded to meet this demand, many are chasing high-cost waste and residue feedstocks compared to the cheaper crop-based alternatives. This supply tightness is most evident in the more advanced transport fuels, such as sustainable aviation fuel or renewable diesel, as producers turn to many of the same feedstocks. Prices for these feedstocks have risen sharply in the past couple of years or so, according to industest analysts.
The uncertainty over feedstock supply, which is likely to put further pressure on biofuel profit margins, combined with goals to decarbonize are elevating price volatility, could lead to potentially higher volumes in Soybean Oil futures and options at CME Group and other related products.
The latest Argus Media report reveals that total European biofuel consumption is expected to reach around 30.6 billion liters in 2025, up 10% from 2024. RED III, the cornerstone of the EU’s environmental policies for biofuels, sets a renewable energy tarobtain of 42% by 2030. For the first time, there is a specific blfinish tarobtain for Renewable Fuels from Non Biological Origin (RFNBO), which includes the utilize of renewable hydrogen and e-fuels. In the transportation sector, it sets a tarobtain of 29% for renewable energy and a 14.5% reduction in greenhoutilize gas (GHG) intensity. The overall energy tarobtain under RED III has increased from 32% to 42.5% compared with RED II, but the tarobtain date for implementation has remained at 2030.
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