June 4, 2025 – The global biodiesel industry is grappling with unprecedented regulatory uncertainty as Washington’s trade policy reversals collide with evolving renewable fuel mandates and shifting feedstock supply chains. This week’s dramatic tariff flip-flopping has left importers questioning invoice obligations while critical policy decisions on renewable fuel incentives remain in limbo.

Tariff chaos creates market paralysis

The biodiesel sector experienced regulatory whiplash as Washington imposed a 50% duty on EU imports, only to suspend it hours later following diplomatic intervention from Brussels. However, the saga continued as a federal judge struck down broader “emergency-law” tariffs on Europe, China, Mexico, and Canada, before an appeals panel restored them the following day.

This policy ping-pong effect has created a state of paralysis, with EU shippers holding back fresh bookings while legal teams analyze the implications. Importers face the uncertainty of potentially refundable invoices, adding complexity to an already volatile market environment.

Congressional action could transform U.S. market

The House-passed “One Big Beautiful Bill” promises to deliver up to $1.50 per gallon incentives for U.S. renewable diesel and sustainable aviation fuel (SAF) producers, but with a crucial caveat, feedstocks must originate from USMCA zone countries. With the Senate yet to act on this legislation, market participants are left speculating about implementation timelines and regional supply implications.

Simultaneously, the White House is considering approval of over 160 small-refinery hardship waivers. Industry analysts warn that blanket approval could devastate RIN values and soy-oil demand, potentially offsetting prospective 45Z tax credit benefits. Conversely, strict reallocation schemes could boost market dynamics, though clarity isn’t expected until late July.

Feedstock markets show regional divergence

Used cooking oil (UCO) markets are displaying distinct regional patterns, with Europe absorbing a record 0.7 million tons in Q1—a 33% year-over-year increase. Chinese UCO exports have shifted toward Europe and Southeast Asia following the collapse of U.S. offtake, which has dropped 27% annually due to trade restrictions.

Palm oil methyl ester (POME) supply remains constrained as Indonesia’s B40 mandate continues absorbing domestic production. Indonesian biodiesel exports have now registered zero for seven consecutive months, with all production diverted to meet domestic blending requirements and offset weaker diesel tax revenues.

SAF demand accelerates infrastructure investment

Sustainable aviation fuel markets are showing robust growth momentum, with holiday-season flight schedules driving increased jet fuel uptake. Widening jet-diesel spreads are pulling Chinese SAF offers higher, while infrastructure investments like Exolum’s $100 million Lima fuel-farm project underscore the sector’s rapid expansion.

The aviation sector’s commitment to decarbonization is creating new demand dynamics that could reshape feedstock allocation and pricing structures across the broader biofuels complex.

Energy market backdrop remains challenging

With Brent crude hovering near $64 per barrel, pressured by OPEC+ supply discussions and weak Chinese economic data, fossil fuel margins remain compressed. Low-sulfur gas-oil cracks have stayed narrow, meaning biodiesel prices are moving primarily on feedstock flows and local blending requirements rather than energy price correlations.

Market outlook: regulatory resolution key

The biodiesel sector’s near-term trajectory hinges on resolution of multiple regulatory uncertainties. Key factors include Congressional action on renewable fuel incentives, White House decisions on refinery waivers, and ongoing trade negotiations that could reshape global supply chains.

For biofuel producers, feedstock suppliers, and policy stakeholders, navigating this complex landscape requires comprehensive market intelligence and real-time regulatory tracking.

This analysis highlights key developments from Vesper’s comprehensive Week 23 biodiesel market intelligence report. Access detailed pricing data, regional supply analysis, and regulatory impact assessments on the Vesper platform: https://app.vespertool.com/market-analysis/1989