COMMODITIES 2025: European renewable diesel supply likely sufficient despite loss of Chinese imports

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

Europe's renewable diesel supplies remain on track to meet growing regional demand next year despite the loss of cheap Chinese imports as indigenous production grows, according to industry stakeholders.

In 2023, the EU consumed 171,000 mt more renewable diesel than it produced. In 2024, this switched to a surplus of 342,000 mt, and in 2025 a smaller surplus of 72,000 mt is expected, while in 2026 the surplus will grow to 328,000 mt, according to S&P Global Commodity Insights' Global Biofuels Special Report Nov. 28. The surplus is due to ongoing increases in production capacity slightly overtaking demand, despite a rise in EU biofuel consumption mandates and announced losses in capacity in 2024.

This comes after an extended period in which European industry groups complained that excess, unsustainable biofuel feedstocks from Asia were swamping the market and putting producers out of business.

"In 2025, there is reserved optimism that the market will improve considerably owing to several reasons: the antidumping duties in place on Chinese biodiesel, the FuelEU maritime regulation, and the introduction of the Database for Biofuels (UDB) strengthening traceability and market transparency," Leonidas Kanonis, communications and analysis director at the European Waste-Based & Advanced Biofuels Association, told Commodity Insights.

Renewable diesel production is closely linked to that of sustainable aviation fuel as it involves just one more stage than renewable diesel in its production process. This means that producers can pivot between the two and that a demand bump for one can affect the other. A key SAF mandate in the EU in 2025 is that aviation fuel suppliers must ensure that at least 2% of the fuel blend made available to aircraft operators at EU airports is SAF. Analysts and market stakeholders have said they are confident supply can meet this demand target.

A market under pressure

Antidumping probes in Europe against biodiesel and renewable diesel imports from China have been underway since late 2023, and Brussels has been imposing preliminary antidumping duty rates since mid-August after a proposal was issued in the middle of July.

Prices declined through 2023 and stayed weak in 2024, but producers are hopeful this will now see a reversal of some sort.

Platts assessed the premium of used cooking oil methyl ester that complies with the EU's Renewable Energy Directive over ICE Gasoil futures at an average of $739/mt in so far in the fourth quarter, below a five-year average of $845/mt. From the start of 2019 until June 2022 the assessments averaged $1,046/mt, when, according to market players, the effect of Chinese imports became noticeable.

Taking the necessary measures to secure a level playing field and fair competition for the entire European biofuels industry is crucial to safeguarding the industry's competitiveness and long-term sustainable growth potential, Finnish refiner and biofuel producing powerhouse Neste told Commodity Insights.

"This is also needed for providing a solid foundation for investments into growing production capacity," Neste said.

Part of a jigsaw

Europe is but part of a wider global supply and demand picture and there are a number of moving parts to watch out for in 2025.

Overall challenges for the market are demand for feedstock from competing industries, largely the SAF market with the introduction of the ReFuelEU mandate, as well as competing regions. The US imported huge amounts of UCO last year from China, while Southeast Asian and UAE countries promote their own bio-blending targets, Kanonis said.

The trade war between EU and China trade on biodiesel and feedstocks has involved not only the EU imposing antidumping tariffs, but also China already revoking a domestic rebate for UCO exports, raising -- in the short term, at least -- feedstock prices for potential buyers, he added.

European and global renewable diesel supply are slated to grow over the next few years and beyond, until the production of renewable diesel, also known as hydrotreated vegetable oil, gives way to the production of SAF, and vehicles run increasingly on electricity.

European production was 3.35 million mt in 2022, accounting for 36% of global output. In 2030, Europe will produce 9.1 million mt or 30% of global supply, thereafter inching up to 10.01 million mt or 29% of global supply in 2037, analysts at Commodity Insights said in their Biofuels Supply and Demand Outlook 2024 in July.

Demand growth should accelerate in 2025 to 10%, owing to more ambitious mandates in various countries, efforts to cut the use of surplus tickets for renewable fuel and the gradual implementation of the EU's "RED III" and FuelEU Maritime, with consumption reaching almost 19 million mt in 2026, Commodity Insights analysts said Dec. 5.

Germany recently halted greenhouse gas emissions ticket rollovers in 2025 and 2026 and this has supported forward prices for these years, while it cut the outlook for Q4 2024 and post-2026, the analysts said.

2025 trade flows

Chinese UCO exports totaled 223,756 mt in October, down 6.5% on the month but still 18.8% higher on the year, according to data from Commodity Insights compiled in December.

In August 2024, the EU imposed provisional antidumping duties of up to 36.4% on Chinese biodiesel imports after finding that European producers struggled to break even during the year due to an influx of supply. The EU antidumping duties will result in a significant slowdown in biodiesel production in China, Commodity Insights analysts said Dec. 16.

UCO imports fell to a seven-month low in September as flows from China slowed significantly amid more global competition. The EU's antidumping duties on Chinese biodiesel are expected to lead to the EU producing more biofuels domestically, which would lead to higher feedstock demand.