Chemical Conversations - Between road fuels and petrochemicals: why is bionaphtha important and how is it priced?

Author Argus

Learn more about the uses of bionaphtha and its price trends.

Understand why demand for renewable feedstocks is growing in the petrochemicals market and what effects the competition with the mandated road transport sector has on bionaphtha prices and supply. In this podcast Muhamad Fadhil, SVP strategy and business development, Sarah Rae, VP Olefins and Giulia Squadrin, Associate Editor Biofuels.


This podcast is delivered by Argus’ chemical experts using data and insight from Argus Olefins Outlook, Argus Polymers Services, and Argus Biofuels.


Fadhil: Hello, everyone, and welcome to "Chemical Conversations." My name is Muhahad Fadhil, and I'm the SVP, Strategy and Business Development at Argus. This is a special episode brought to you by Argus Media, a leading independent provider of energy and commodity pricing information. Today, we discuss the latest price trends on bionaphtha and implications on the petrochemical markets. And I'm delighted to be joined by my colleagues, Sarah Rae, VP, Olefins, and Giulia Squadrin, Associate Editor, Biofuels. Hello, everyone. Thank you for joining me today.

Sarah: Hi, Fadhil. Thank you for having me. Pleasure to be here.

Giulia: Thanks, Fadhil. Hi, everyone. Nice to be here.

Fadhil: Wonderful. Giulia, let's start with you. What bionaphtha prices does Argus offer and who's interested in them?

Giulia: Yeah, so, at Argus, we have been pricing bionaphtha since early 2022 as part of our daily coverage of the biofuels market. I think it's worth noting we have two separate bionaphtha prices. One is European-focused and one is Asian-focused. So, we have a fob ARA range price for bionaphtha produced from used cooking oil, and also we have a CFR Northeast Asia bionaphtha price. This price, the bionaphtha coverage expands our hydrotreated biofuels coverage. So, we had previously launched prices for hydrotreated vegetable oil or HVO, also called renewable diesel, and sustainable aviation fuel, and soon complete of our suite of hydrotreated products by launching a biopropane price assessment later this year.

The reason we have focused on the European and the Asian market is because we have seen rising demands in these regions, and specifically in Europe we have focused on used cooking oil feedstock. We have extensive coverage of used cooking oil prices across all regions, but we have also seen growing demand for this sort of waste renewable materials and raw materials in the European market specifically and for all applications, actually. So, you ask who is interested in these prices? We've have two main markets that have been interested in bionaphtha. This product can be used in the road transport sector as a blendstock for gasoline, and it can also be used in the petrochemical sector. We'll talk about this more in detail later on, but I think it's worth noting the competition between these two sectors with the road transport sector being mandated. So, you have obligations you have to meet in terms of renewable share that you have to use under European legislations, whereas the petrochemicals market is not mandated. But it's interesting that we've seen interest for both applications.

Fadhil: I think it's a very keenly watched kind of interplay between the two sectors as you mentioned. How does Argus price bionaphtha, and can you also share some of the price trends that you've observed since our launch in March 2022.

Giulia: The way we price bionaphtha is based on market activity. We speak with participants in both the gasoline sector and the petrochemicals sector, and we collect bids, offers, trades, spreads, and all sorts of indications. We also, and this helps quite a bit in the coverage of bionaphtha, we have a very good view of the HVO market. We have a trading platform, Argus Open Markets, where HVO trades on a weekly basis. So, every Friday, there is public bids and offers for HVO, and, as I mentioned, they all come from the same family of hydrotreated products. HVO is one of the key markets in the sense there's more production compared to bionaphtha, it's more liquid. And interestingly, HVO has both application on the roadside and the chemical side. So, having a very good view of the HVO market also helps with that.

But primarily, we are aware of the link between the two prices, and we collect information from anyone who is involved in the bionaphtha market and make our assessment based on the feedback that we receive from market participants. And in terms of price trends, we launched prices in March last year, and we've seen the highest highs and the lowest lows, I would say, in this period. So, in summer of last year, we've seen record levels surpassing $3,600 on an outright basis. And then, we have seen lows dip below $2,000 on an outright basis. So, if you compare it to conventional naphtha, we've seen premiums above $3,000, or, no, actually nearly, but, yeah, around the $3,000 mark and also below $1,400.

These extremes are linked to a couple of factors. About a year ago, we were seeing very strong competition between the chemicals market and the road transport sector, and some participants in the petrochemical space, they were paying a premium over the road transport sector, which is mandated. You have certain obligations to meet your targets on the roadside, and that sets a floor for prices. So, since you're competing with a mandated market, if you want to get your hands on the product, we have seen in certain instances participants in the chemical space having to pay higher values. Things have changed a little bit since then. Interest is still pretty strong, and I think we'll discuss it in more detail again. But there's also other macroeconomic factors that have really impacted the trade of some of these renewable feedstocks for polymers production.

So, for example, producers, they've seen that they were struggling to pass on the cost in certain cases to end buyers. The interest is there, but then when you start talking about very high premiums, then it slows down negotiations. So, we have seen a bit of a decrease in demand, not because the overall interest is not there, it just kind of feels like a temporary slowdown because of the macroeconomic situation. And also, in general, we've seen a decrease in prices in the biofuels complex because of a variety of reasons, including, again, macroeconomic factors. So, European markets have seen lower diesel consumption because of inflation and fears of recessions, and so on, and that has translated into lower biofuels consumption. And production is growing. We've seen more imports coming in as well from elsewhere. And so, we have had this situation in which prices were trending lower.

The demand side has been not particularly strong, I would say from both sectors that would be purchasing bionaphtha, but nevertheless, we're still seeing demand for these renewable feedstocks and inquiries and interest also growing from other regions, including the U.S. For example, we still see product flowing to Asia from Europe, and more producers of HVO that will be online in the coming months and years. So, we should be seeing an increase in availability for some of these products. It's gonna be interesting to see what happens in terms of pricing going forward.

Fadhil: I like that you've detailed this competing demand on road transportation chemicals, and you've also mentioned the recession impact as well. Sarah, over to you now as our olefins and polymers expert. I'm keen to hear why the petchem sector is so invested in bionaphtha and HVO considering there's no obligation or mandate in place.

Sarah: It's a really interesting phenomenon, isn't it. And I think there's a number of reasons around it. If you look at the petchems industry and its reliance on polyethylene, polypropylene, PET as downstream products, there's really a case of forward survival for them in terms of the way they market the product and what the brand owners are expecting them to offer into the market. So, the brand owners on a global basis want to be able to offer their customers a green package in terms of their plastics they use. Plastics offer huge advantages into the markets in terms of their performance and the properties they give products, which mean that, the storage and the safe transportation of products over long distances, but they need to be able to green those products and finding a way to reduce the carbon footprint of the plastics will support the growth of the industry and support in some ways its survival well into the future.

And the benefit of bionaphtha and HVO are the complete drop-in replacements for most producers. So, without very much investment particularly if you are using the ISCC PLUS mass balance process, you can drop them into your cracker, you can use them just as you are using normal naphtha or different feedstocks into the crackers without doing anything at all, and then you can market green product to your customers. And it's really interesting in that the producers out there have major targets in terms of what they want to be able to offer their customers over the next 5-10 years. So, looking at the people who have really announced targets, there's something like 17 million tons of commitment out there in terms of the industry about offering these products to the market. The problem comes, and Giulia highlighted this, is one of price, so, how affordable are these products into the market?

And certainly, over the last couple of years, with higher inflation, with consumers really tightening their belts and wanting to spend less, the demand for these green products, because they're more expensive, has been much reduced. And there's a feeling, that we need to be able to have some political will behind the growth of these products, but also customers need to be able to afford them in their normal shopping basket. I mean, if you're looking at other issues for the chemical industry, you've got HVO and bionaphtha as one stream they can use to green their products. They're also looking at using more mechanically recycled products. So, that is product that's being collected, chipped, and reused, and then added into the streams potentially as a combination of virgin plastic and final plastic.

There's new routes using something like ethanol. Certainly, in the European market, there's a new investment out there going from green ethanol into ethylene. That's something that we've also seen quite widely in South America in their investments. And there's also the route that would use waste plastic, recycle it into something called pyrolysis oil, which is basically an oil equivalent, and then recycle that around the cracking loop. But all of these have their problems. All of them are more expensive than conventional routes, and at the end of the day, all of them produce waste. So, plastic waste has become a real reputational issue for the chemical industry, and they're trying very hard and making lots of investments downstream into recyclers and waste collectors and sorters to help solve that problem, which is it is part of the wider plastics recycling industry.

Fadhil: And just to tie back to what Giulia mentioned earlier, what is your outlook on bionaphtha demand in the petrochemical sector more specifically?

Sarah: It would grow. If it's affordable, it will definitely grow. The issue is affordability. Those premiums that Giulia was talking about, I think it maxed out to over $3,000, and the premiums something like, at the moment, over $1,000 makes it much more expensive as a product, and that's not affordable for everybody. So, there's lots of potential for growth if it becomes affordable. And I think the European industry is tending to lead the way on this, but it's also a global phenomenon. So, there is an element of if Europe's going to invest in these new routes and spend the money and have the more expensive plastics available to the market, then maybe the governments need to step up and protect the industry from imports which are coming from other regions at lower prices. So, yeah, lots of issues to tackle.

Fadhil: Sarah, Giulia, really thank you very much. Your insights are all very excellent, and I've learned a lot today. I wish we can go on, but due to time constraints, we have to draw to a close now. It's been a pleasure talking to you both, and thank you to everyone for listening. This has been a special edition podcast of "Chemical Conversations." For more information on Argus, please visit


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