July 10, 2025 – Week 28 Market Update

The biodiesel sector experienced initial volatility before stabilizing as the landmark “One Big Beautiful Bill Act” became law, fundamentally altering feedstock sourcing patterns across North America while creating new challenges for international suppliers.

Trading activity rebounds after midweek slowdown

FAME0, RME, and UCOME prices declined from the previous report as traders reported slower liquidity in early trading sessions. However, activity in the Argus trading window began picking up from Wednesday, pulling prices higher as market participants adjusted to the new regulatory environment.

Rising low sulfur gas oil (LSGO) provided crucial support to biodiesel margins, with LSGO spot prices increasing $18/mt to $682/mt compared to the same time last week. The energy price rally helped widen previously squeezed premiums across biodiesel products.

Geopolitical tensions add volatility

Renewed Houthi attacks in the Red Sea contributed to energy price volatility, with reports that the Houthis have sunk two vessels in a week. Combined with ongoing tariff discussions, these developments are adding uncertainty to oil price forecasts and biodiesel margin calculations.

“Big Beautiful Bill” becomes law with major implications

The “One Big Beautiful Bill Act” was enacted by both chambers of Congress and signed into law on July 4, 2025, bringing significant changes to the US biofuels landscape:

Key provisions include:

  • Two-year extension of tax credit 45Z to December 31, 2029
  • Elimination of indirect land use change from emissions calculations
  • Crop-based biofuels now eligible for credits similar to waste-based biofuels
  • Eligibility limited to North American feedstocks (US, Canada, Mexico only)

International feedstock suppliers face challenges

The legislation represents a significant blow for Chinese UCO and Brazilian tallow exporters who had anticipated more favorable terms. The situation is further complicated by Trump’s threat of 50% tariffs on Brazil over political disputes.

Chinese UCO market dynamics reflect the new reality:

  • FOB China UCO prices at $1,045/mt officially
  • European buyers seeking discounts with offers “impossible above $1,010/mt FOB”
  • EPA-certified UCO quotations stable at $1,065/mt but spot purchases nearly stagnant
  • CIF ARA UCO traded at EUR 960/mt

US UCO imports surge before regulatory changes

US UCO import volumes jumped to 215,000 mt in May from 95,000 mt in April, marking the highest level for May as importers likely accelerated purchases ahead of the regulatory changes.

EXW Netherlands UCO remains at EUR 1,063/mt while tallow technical category 3 (5% FFA) increased EUR 5/mt to EUR 1,015/mt FOB ARA, showing resilience in European markets.

Feedstock market adjustments

While rapeseed oil and soybean oil prices declined week-over-week, the increasing energy prices are likely to provide support to vegetable oil-based biodiesel margins. The structural shift toward North American feedstocks is expected to create new supply and demand dynamics across the sector.

Market outlook and procurement implications

The enactment of the “Big Beautiful Bill” marks a watershed moment for North American biofuels, creating both opportunities and challenges for market participants. Procurement strategies will need fundamental revision as traditional international supply chains face regulatory barriers.

European and Asian suppliers must navigate new competitive dynamics while North American feedstock producers benefit from enhanced regulatory support. The elimination of indirect land use change calculations particularly favors crop-based biofuels, potentially reshaping feedstock preferences.

Trade flow disruptions are expected as the market adjusts to the new regulatory framework, with pricing volatility likely as supply chains reconfigure around North American sourcing requirements.

Read the full week 28 Biodiesel market analysis on the Vesper platform here: https://app.vespertool.com/market-analysis/2088