News
13/07/26
German HVO demand held back by low Rhine water levels
London, 13 July (Argus) — Low water levels on the Rhine have recently weighed on
northwest European hydrotreated vegetable oil (HVO) prices by curbing demand
from German buyers, but market participants expect the weakness to be temporary
as stronger mandate-driven consumption and tighter global supply fundamentals
are likely to support prices later this year. The Argus used cooking oil
(UCO)-based HVO Class II and palm oil mill effluent (Pome)-based HVO Class IV
outright prices have averaged around $2,765/t and $2,990/t during June and July
so far, down from around $2,945/t and $3,290/t during April and May. The decline
has been driven largely by weaker demand from Germany, one of Europe's largest
biofuel consumers. The water level at Kaub — a critical chokepoint on the Rhine
— is forecast to fall to 50cm today, the lowest since August 2022. The resulting
logistical disruptions have encouraged some German buyers to meet their
greenhouse gas (GHG) reduction obligations through buying GHG quota compliance
from other companies, rather than buying physical HVO. Companies generate the
compliance by placing eligible renewable fuels that deliver greenhouse gas
reductions compared with fossil fuels on the market. In Germany, when converted
to the same unit as the GHG quota compliance certificates, HVO classes II and IV
ended the week at €343.97/t CO2e and €451.90/t CO2e, according to Argus
calculations ( see chart ). The 2026 Advanced and Other GHG quota were at
€372.50/t CO2e and €480/t CO2e because of strong buying from obligated
companies. Comparing in the same unit, called the cost per ticket (CPT), shows
whether physical compliance or buying GHG quota is cheaper at any given time.
Renewed volatility in gasoil prices, brought on by the collapse of the fragile
ceasefire that followed the signing of the US-Iran Memorandum of Understanding,
has also weighed on HVO buying interest. Traders said the uncertainty has
encouraged many market participants, particularly smaller buyers, to delay
purchases and adopt a wait-and-see approach. But market participants expect
prices to strengthen once Rhine water levels rise, with HVO-specific drivers
also pointing to a tighter supply-demand balance in the months ahead. The case
for HVO RED III compliance targets are set at record levels across many European
demand centres this year. In Germany alone, Argus Analytics estimates HVO demand
at around 2.1mn t in 2026, up from around 800,000t in 2025, after Germany's RED
III implementation entered into law in early June. The new legislation abolished
the practice of double counting for advanced feedstocks listed in part A of
RED's Annex IX, which is expected to significantly boost HVO demand this year.
Germany will require higher absolute volumes of renewable fuels to meet
greenhouse gas (GHG) reduction quotas, supporting demand for drop-in fuels such
as HVO. Increased demand from the Netherlands could also lend support to the
market, participants said. Dutch renewable fuel tickets have traded at a
discount to physical HVO for most of 2026, partly because ticket generation has
increased as a larger volume of renewable transport credits has been created
from electric vehicles (EVs) and biomethane than in previous years. In the
Netherlands, on an equivalent basis as the tickets, HVO classes II and IV ended
at 40.52c/kg CO2e and 51.69c/kg CO2e on 10 July, respectively, compared with
37.62c/kg CO2e and 48.50c/kg CO2e for the equivalent tickets, LRE-B and LRE-G.
On the HVO supply side, the finalisation of the new US renewable volume
obligation in April has created a domestic requirement that is expected to
outpace US HVO production. This has effectively eliminated the exportable
surplus that previously flowed to Europe, which made the US one of the region's
biggest HVO importers. The US had an exportable surplus into Europe of around
750,000t in 2025, according to Argus Analytics. Europe will have to increasingly
rely on HVO supply from Singapore, China, Malaysia and Canada, which could also
flow in part to the US. US output has also faced operational challenges. A
reported explosion at PBF's facility in May, combined with hydrocracker
maintenance at Phillips 66's Rodeo refinery has reduced available supply. A
third US facility may undergo a turnaround this summer. In Europe and Asia,
expected maintenance at several production facilities this summer — including
Ecoceres and Neste — is expected to constrain supply in the near term, lending
further support to prices. Expectations of firmer prices are reflected in the
Class II forward curve. The HVO Class II Argus -settled Ice contract as a
differential to gasoil has remained in contango since 6 July and peaks in
October. This structure is partly driven by the backwardation in the gasoil
curve, reflecting expectations that tensions between the US and Iran will ease
and HVO premiums to gasoil adjust higher as a result. But the outright HVO curve
is also slightly in contango, with prices peaking in September. This suggests
that HVO-specific fundamentals are likewise pointing to higher outright prices
in the near term. By Evelina Lungu HVO fob ARA outright $/t Cost difference:
Blending vs ticket purchase (Germany) €/t Send comments and request more
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