However, prices then steadily increased from the start of May onwards, rising from $1045/mt (74ppl) to reach $1200/mt (80ppl) by mid-June, its highest level since September 2022, with strong US demand absorbing a significant share of global UCO supply, following amendments to its Renewable Fuels Standard biofuels policy announced at the end of Q1.
RIN (US biofuel credit) prices rose sharply in response to the changes, creating a more profitable environment for US renewable fuel producers, driving demand for biofuel feedstocks such as UCO and tallow as they look to maximise production.
Biodiesel
Biodiesel prices opened Q2 trading at a discount to Low Sulphur Gasoil (LSG) for the first time ever due to the closure of the Strait of Hormuz, as rapidly rising mineral diesel prices outstripped biodiesel grades, with the FAME-10 premium to LSG reaching a low of -$37.25/mt (-2.5ppl) on 7th April. Outright prices were suppressed through much of April due to a combination of high feedstock supply and a temporary excess of certificates (ERUs) in the Netherlands driven by high Sustainable Aviation Fuel (SAF) production. Under Dutch regulations, ERUs generated from SAF can be used to meet road fuel mandates, therefore increased SAF supply saw compliance demand for road biofuels fall.
Demand recovered throughout May into early June as mandates in Germany and the Netherlands created a more bullish outlook. However, outright prices then fell back as the conflict between the US and Iran reportedly neared resolution, causing a decline in underlying LSG prices. Despite this, strong demand meant biodiesel prices did not fall to the same extent, with the FAME-10 premium to LSG rising above $630/mt (32ppl) for the first time since February.
FAME-10 & UCOME
While April’s diesel price rally saw biodiesel differentials to LSG compress, the UCOME premium to FAME-10 widened early in Q2, rising from $102.5/mt (6.7ppl) to $160/mt (10.4ppl) by 21st April. Despite low blending costs as a result of the squeeze on LSG premiums, mandate and blend wall limitations capped demand for cheap FAME, meaning UCOME prices remained comparatively strong. Compliance demand saw outright prices across both grades rise in May, with UCOME in particular reaching a 3.5-year high of $1680/mt (110ppl) on 1st June, as European biofuel demand reflected its preference for high GHG savings vs fossil equivalents.
However, as LSG prices then began to fall, biodiesel premiums compressed unevenly across different grades, with outright UCOME prices falling at a faster rate compared to other biodiesels, causing the premium to FAME-10 to narrow to a Q2 low of $33/mt (2ppl). This was short-lived, as FAME-10 prices declined by $100/mt across June, closing the quarter at $1487/mt (99ppl), while UCOME prices remained firm, trading above $1600/mt (106ppl) at the end of Q2.
Market Outlook
The regulatory landscape in the US and Europe continues to shape biofuels markets in Q2, with the implementation of the US’ new ‘Set 2’ Renewable Fuels Standard and the approval of amendments to German and Dutch national biofuels policies. This has already impacted biofuels markets, with high GHG reduction grades such as UCOME and HVO in particular supported by compliance demand. This is a trend that looks set to continue through the second half of the year, with the mid to long-term demand outlook remaining positive.
The abolition of double-counting for advanced biofuels will continue to lift physical demand, with suppliers no longer able to rely on multipliers to meet quota obligations. RME-linked grades (FAME0 and FAME-10) face a less certain picture, constrained by blend wall limits, along with a weaker GHG savings profile relative to HVO and UCOME, leaving prices more reliant on conventional LSG price correlation than regulatory tailwinds throughout H2 2026. However recent increases in HVO prices have seen blenders revert to UCOME or other FAME grades despite their lesser GHG credentials.
HVO
Despite indications of increased supply into the market, European HVO prices remained elevated in April. Wholesale T2 prices for UCO-derived HVO rose to $3149.50/mt (169.0ppl) on the 22nd of April, marking its highest level since the end of August 2022 amid rising gasoil futures due to the Middle East conflict.
Additionally, expectations of tighter compliance-driven demand under strengthening renewable fuel mandates has lent support to HVO prices, reinforced by Germany’s approval of a revised greenhouse gas reduction (THG) quota, raising its 2026- 2040 renewable fuel targets. In May, HVO prices fell by $162.50/mt (7.6ppl) amid a significant retreat in underlying gasoil futures. Trade data revealed a sharp decline in HVO flows across Europe, following significant demand destruction, particularly in voluntary markets, and flows adapting to the changing mandates around the globe.
However, reports of additional supply coming online continued as Repsol launched its 200,000 mt/ year plant in Spain, Orlene launched a 300,000/ mt plant in Poland, and Brazil was reportedly considering a $1 billion biofuel investment. HVO prices continued a downward trajectory in June, declining to $2710.50/mt (159.3ppl) by the end of Q2, largely underpinned by sharp losses in gasoil futures as a result of the peace agreement between the US and Iran, which reduced geopolitical and supply-side risk premiums.
Certificates
Following a Q1 decline, non-crop RTFC prices opened Q2 at a two-year low of 16.20 pence per certificate (ppc), as rising diesel prices narrowed the differential between biodiesel and mineral diesel and reduced blending costs. However, RTFC prices started to rise from the 17th of April following a decline in underlying gasoil futures, after Iran announced the Strait of Hormuz would reopen to commercial traffic during a temporary ceasefire with the US.
In May, RTFC prices remained relatively stable, edging up from 18.30ppc to 18.90ppc as falling diesel prices were offset by modest increases in biodiesel. In June, renewed expectations of a US-Iran settlement and the reopening of the Strait of Hormuz contributed to a sharp fall in diesel prices, widening the biodiesel- -mineral diesel spread and increasing blending costs, helping non-crop RTFC prices recover to pre-conflict levels of 24.50ppc.
News & Policy
Anticipated changes to the UK’s Renewable Transport Fuel Obligation (RTFO) have been pushed back to at least 2028 in response to high fuel prices arising from the US-Iran war. Following an initial consultation announced in November 2024, proposed changes were expected to be announced in 2026, ahead of a target of 2027 for implementation. The changes are likely to include more ambitious targets to bring the UK in line with its EU counterparts, requiring a higher content of biofuel in the supply mix, therefore likely raising the cost of fuel to the end user.
The European Biodiesel Board has called on the EU to maintain ambitious renewable fuel targets beyond 2030, warning that carbon pricing mechanisms alone are unlikely to provide sufficient incentives to drive investment in low- carbon fuels. The industry body argues that continued dedicated transport fuel mandates under the post-2030 Renewable Energy Directive will be essential to provide long-term demand certainty, alongside stronger enforcement, improved certification frameworks, and fewer barriers to higher-blend biofuel use.
The UK Department for Transport (DfT) has launched a Call for Evidence to review the flexibility of its SAF mandate amid concerns over limited non-HEFA and e-fuel supply. The consultation, which closes on the 28th of July 2026, is considering proposals to allow a greater rollover allowance (enabling obligations to be met using SAF certificates generated in the previous compliance year,) introduce additional incentives for advanced SAF pathways to boost investment, and revise certificate rules and supply caps to address market constraints.
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