Hydrotreated vegetable oil (HVO, also known as renewable diesel) is the one of the fastest-growing fuel markets in Europe and the US. Capacity is forecast to double by 2028 with demand likely to outstrip supply.
In line with this rapid growth, a proper physical spot market is emerging. Argus captures the value of HVO using bids, offers and trades made by market participants to underpin Argus HVO price assessments.
This means you're accessing truly representative daily pricing for HVO, that captures relevant information on supply, demand, feedstocks and more
Explore our analysis of this developing market with special white papers, webinars and podcasts.
HVO stands for hydrotreated vegetable oil, which is produced by hydrotreating renewable fats and oils. It is also known as renewable diesel. This renewable biofuel is used as a replacement for diesel in road fuels. Its use is growing as industries comply with regulatory targets for reducing road transport emissions. A smaller part of the demand is voluntary as companies set their own targets for emissions reduction. Supply and demand fundamentals, and hence the value of HVO, are mainly driven by ever-changing environmental mandates.
HVO and biodiesel can be produced from the same renewable feedstocks but use different technologies. Biodiesel is produced by transesterification of renewable oils and fats whereas HVO is produced by hydrotreating such feedstocks.
Diesel can be blended with HVO up to 25-30pc whereas biodiesel has a maximum limit for diesel blending of 7pc, a so-called technical blend wall.
Argus publishes the price benchmark for European biodiesel, Argus FAME 0.
HVO is instrumental in reaching higher biofuels blending targets set out by the EU’s updated RED for 2021-30. It is a drop-in renewable fuel that can be blended with conventional fossil fuels up to 25-30pc. This means HVO is not subject to the 7pc blend wall that applies to conventional biodiesel, and that it can also be used as a standalone 100pc replacement for diesel. With such high blending ratios into fossil diesel, HVO provides an attractive way to efficiently decarbonise the European diesel market.
When HVO first emerged it was traditionally priced at a fixed premium to conventional diesel as that is what it replaces. However, there is a problem with this approach as the HVO market has its own supply and demand market dynamics. For example, the feedstock cost for producing HVO, namely vegetable oil, can vary significantly and is not correlated to the actual diesel market. This means a fixed premium runs the risk of not being representative of the actual cost of producing HVO.
In addition, on the demand side, as HVO demand is driven by regulatory set targets of blending renewable fuels into transport fuels. A fixed premium simply will not reflect what buyers are willing to pay to meet the mandated renewable fuel blends.
Simply put, a fixed HVO premium vs diesel risks not reflecting the actual physical market and will send the wrong signals to buyers and sellers but also to investors looking to participate in this market.
Argus provides a solution by publishing daily prices for HVO based on what is happening in the physical market, including bids, offers and trades. Argus also publishes price assessments for the key feedstocks.
Argus HVO price assessments are underpinned by actual physical trades, bids and offers of HVO. To aid transparency, our price discovery process can be followed in real time on the pricing platform Argus Open Market, where market participants are initiating trades by placing physical bids and offers on the platform, which then underpin the Argus HVO pricing.
To further ensure that Argus pricing is truly reflecting what is going on in the HVO market, in contrast to a fixed premium to diesel, the wider biofuels complex is also covered. By publishing daily prices for HVO feedstocks (such as used cooking oil and tallow), as well as other products from the hydrotreated complex such as Sustainable Aviation Fuels and bionaphtha, it means additional checks and controls on the fair value of HVO are in place.
Argus provides market participants and users of the HVO prices with the assurance of robust, transparent and market reflective pricing that truly is based on the HVO market dynamics.
- HVO producer | Argus prices capture the market value of HVO providing you with a trusted, independent reference price at which to sell.
- Feedstock originators | Understand the price of the finished product to inform your pricing strategy for your feedstocks.
- Traders | Use the Argus HVO prices as an independent price reference in contracts when trading within and between regions.
- Downstream consumers | Have confidence that you are paying a fair price for your renewable fuel while adhering to regulatory mandates.
- Downstream suppliers/Bulk distributors | Assess the price at which you should set HVO for selling to end-consumers.
- Strategy and investors | Use a trusted reference when evaluating investment opportunities and risks within this fast-growing market.
- Regulators | Inform regulatory decisions with trusted, expert price and market insights relating to the energy transition.
Argus also publishes independent prices for feedstocks, HVO and other fuels and associated environmental credits separately, providing the market with maximum visibility into the entire bioenergy value chain.
Global HVO Capacity
The Argus biofuels team track new, planned and operational HVO plants and collate this data for subscribers to Argus Biofuels.
We will soon share this proprietary information with a new map showcasing HVO capacity around the world.
Argus Open Markets for HVO
Argus Open Markets (AOM) is a web-based electronic platform enabling registered market participants to post bids, offers and initiate commodity deals in real time on the spot market. The platform provides transparent market and price information for the spot value of the traded commodity. Market participants are able to see market developments unfold in real time.
HVO spot trades initiated on the platform have doubled since 2022, reflecting a growing and maturing HVO market. With bids and offers being posted every week, this increased activity on the platform helps the market clear more efficiently and reflects a robust value for HVO.
White paper: Renewable feedstocksFrom Fossil Fuels to Renewable Sources: The Future of US Feedstocks. Get insight into the feedstocks market as US production continues to shift toward renewable fuels.
White paper: Hydrotreated biofuels: From niche to key commoditiesExplore how the hydrotreated biofuels markets is evolving as capacity and demand grows, leading to increased need for reliable pricing tools.
Renewable fuels and feedstocksJoin market experts Louise Burke and Jacqueline Riegle as they discuss the key factors of the evolving renewable fuel and feedstock markets in the US.
FAQ: Argus SAF and HVO fob SingaporeAs China, Japan and South Korea and companies move away from fossil fuels, hydrotreated vegetable oil (HVO), or renewable diesel, is becoming increasingly popular as an alternative to traditional petroleum diesel.
The bioblend expansion: Renewable diesel and its feedstocksKey trends affecting renewable diesel/HVO and biodiesel in Europe and Asia. What’s the picture for supply and demand in 2023?