Spain waste ethanol demand to rise on tight supply

Spanish Market: Biofuels, Oil products
30/07/26

Spain's newly adopted transposition of the EU's renewable energy directive (RED III) will raise demand for ethanol, especially advanced ethanol. But the legislation will constrict ethanol imports, thus tightening overall ethanol supply.

The increased biofuels mandates under Spain's REDIII will support ethanol demand once implemented, in 2027 at the earliest. But demand for advanced ethanol, made from waste-based feedstocks listed in Annex 9a of the EU's renewable energy directive, is also markedly set to grow in Spain as of 2027, thanks to a new advanced bioalcohol sub-obligation under the implementation of REDIII. The mandate will start at 0.1pc of gasoline consumption in 2027 and rise to 5pc by 2040.

This is a unique sub-mandate to Spain, as most EU member states do not have exclusive waste-based gasoline targets. France and Italy, for example, have bioethanol sub-targets, but none specifically for waste-based ethanol. In other EU countries, like Germany and the Netherlands, there are sub-quotas for waste-based, or advanced, biofuels, not limited to ethanol.

According to Spain's Strategic reserves agency, Cores, the country consumed just over 7mn t of gasoline in 2025. Based on this figure, the new sub-mandate could generate an initial demand of approximately 7,000t of advanced ethanol or biomethanol in 2027, rising to over 350,000t in 2040.

The total ethanol production of the four operational plants in Spain amounts to 647,065t/yr, according to Argus data. Only one of these units makes second generation, waste-based, ethanol, from grape marcs and wine lees, and has a nameplate capacity of 258,293t/yr. Notably, Spanish producers do not solely supply their domestic market. Eurostat data shows that Spain exported 441,055t of ethanol in 2025, with an almost 47pc (206,808t) share being supplied to France and just over 24.5pc (108,292t) going to Greece.

Arbitrage opportunities for suppliers exporting to Spain look to fall from 2027. This is because Spain's RED III framework legislates that only undenatured ethanol is eligible for compliance under the renewable transport fuel targets, opposed to denatured ethanol which contains additives making it unfit for human consumption.

Spain imported 308,096t of ethanol in 2025, according to Eurostat data, with just over 61pc, or 189,027t of this being denatured product. The US was Spain's largest supplier at 141,579t, all of which was denatured ethanol.

The change in legislation means that imported ethanol will all be subject to the maximum import duty of €192/m³ for undenatured product, compared with a lower €102/m³ duty for denatured ethanol. The Netherlands made the same change in its RED III draft in October. Germany and France also already exclude denatured ethanol imports from their national transport mandates.

This transition to undenatured ethanol, aligning with the policy of other key EU countries, may reduce opportunities for arbitrage with the EU. This is because it would thereby prevent some exporters, like the US, from sending denatured cargoes to profit from lower tariffs, and make those cargoes that have been sent more expensive after clearing customs.

By Toby Shay

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30/07/26

Mexico economy tops forecasts with 2.2pc 2Q growth

Mexico City, 30 July (Argus) — Mexico's economy grew by 2.2pc in the second quarter of 2026, led by solid expansion in the agricultural sector and steady growth in the industrial and services sectors. Growth in gross domestic product (GDP) accelerated from an annual 0.2pc in the first quarter, statistics agency Inegi reported. The first-quarter figure was revised up from 0.1pc, reinforcing signs that the economy began gaining momentum in March. The second-quarter result followed 1.7pc annual growth in the fourth quarter of 2025 and a 0.2pc contraction in the third quarter last year. The primary sector, which includes agriculture, fishing, mining and hydrocarbon extraction, expanded by 7.6pc in the second quarter after growing 0.4pc in the first quarter, revised from an initial estimate of a 0.1pc contraction. Industrial sector output, including manufacturing, construction and mining, grew by 0.9pc after contracting 1.2pc in the first quarter, revised from a 1.3pc decline. The services sector expanded by 2.6pc from April to June, up from 1pc growth in the first quarter, revised from 0.7pc growth. The annualized second-quarter result surpassed the 2.1pc estimate from Mexican bank Banorte and well above its 1.6pc consensus estimate. Banorte said the "very positive" data reinforces its forecast for 1.4pc GDP growth in 2026, citing expected support from industrial and services activity. Banorte expects investment to remain a key driver, highlighting large planned projects in retail and e-commerce, including Mercado Libre's $4.6bn investment in Mexico. It also expects construction to benefit from government-backed spending on hospitals, natural gas infrastructure and renewable power projects. Banorte added that Mexico's trade outlook remains favorable despite the US decision on 1 July not to renew the USMCA free trade agreement while negotiations continue. Fitch Ratings estimates the latest US tariffs tied to forced-labor measures will actually lower Mexico's effective tariff rate to 3.7pc from 5pc. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.

Rhine oil barge rates at record on near-impassable Kaub

30/07/26

Rhine oil barge rates at record on near-impassable Kaub

Hamburg, 30 July (Argus) — Freight rates for barges carrying oil products on the Rhine have hit an all time high because low water levels have left the river's Kaub bottleneck practically impassable and have rendered limited shallow draft barge resupply uneconomical. At the start of the week, the Kaub bottleneck on the Rhine fell below the critical 30cm mark, making the route impassable for most inland barges. Shipowners said only a few specialised vessels with shallow drafts can still pass, but these are typically tied to long-term charter agreements and crews require considerable experience and detailed knowledge of the shoals around Kaub to navigate safely. The Upper Rhine and Main River are now practically cut off from the Amsterdam-Rotterdam-Antwerp (ARA) trading hub. The same is true for Switzerland, which heavily relies on imports of oil products from ARA via the Rhine. Problems may soon extend to the Lower Rhine. Barge loading operations are at risk of being suspended at the beginning of the week ending 7 August, as a result of extremely low water levels. The water level at Duisburg is forecast to reach a historic low by the end of the current week, which would make vessel loading impossible and potentially cut the direct route from ARA to the 251,000 b/d Gelsenkirchen refinery. Barges transporting oil products or blending components to and from the refinery switch from the Rhine to the Ruhr River at Duisburg, then reach Gelsenkirchen via the Rhine-Herne Canal. If water levels at Duisburg fall as expected, loading restrictions will make such shipments uneconomical or impossible, traders said. Shipowners have been raising freight rates for shipments from ARA to destinations along the Rhine and Main since mid-June, with the pace of increases accelerating in the second week of July. Freight rates to Duisburg, Frankfurt and Karlsruhe have now reached record highs since assessments were launched in 2012 (see chart). Only rates to Cologne and Basel were higher once before, in August 2022, when low Rhine water levels coincided with maintenance at the Gelsenkirchen refinery and production issues at Austria's 193,700 b/d Schwechat refinery. When barge resupply and outbound shipments become difficult or impossible, rail transport appears to be an alternative. But traders and shipowners said there is very little spare capacity for additional rail shipments. Many market participants are seeking alternatives to barge transport at the same time, further tightening rail availability. Price gaps Severe disruption to resupply logistics and higher freight rates are causing price increases at import hubs in western Germany compared with refinery locations. Suppliers at the 310,000 b/d Miro refinery in Karlsruhe can no longer ship relevant volumes of surplus product by barge to other destinations or ARA. As a result, they are lowering prices for truck loadings of heating oil, diesel and gasoline to reduce excess inventories. The disconnect between import and refinery markets has reached almost unprecedented levels. Heating oil, diesel and gasoline in the Rhine-Main region are trading way above prices at Miro (see chart). Gasoline is increasingly difficult to source on the spot market in Rhine-Main, the Cologne region and western Germany. Many suppliers have withdrawn from the spot market, likely because low water levels are preventing adequate supplies of blending components, making normal gasoline production impossible. By Johannes Guhlke fca truck loading Rhine-Main area vs. Miro Argus Rhine freight rates from ARA to Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.

Energy crisis drives demand for EVs in 2Q: IEA

30/07/26

Energy crisis drives demand for EVs in 2Q: IEA

Edinburgh, 30 July (Argus) — Fuel price volatility caused by supply disruptions linked to the war in the Middle East supported electric car demand in the second quarter, according to the IEA. Electric car sales rose by 4pc on the year in April-June and by 35pc from the first quarter. But sales fell by 1pc on the year in January-June because of weaker demand in China. More than 90 countries posted higher electric car sales on the year in the first half of 2026, according to the IEA. But this did not fully offset an almost 20pc drop in China, the largest market for electric vehicles (EVs), which weighed heavily on global sales volumes. EVs are the largest driver of global battery material demand. Outside China, growth was particularly strong in several markets. Electric car sales in Australia, Brazil, India, South Korea and Vietnam roughly doubled between March and June compared with the same period last year, according to the IEA. Global car sales, including internal combustion engine vehicles, fell by 5pc on the year because of weaker sales in China and the US. "Road vehicles account for nearly half of global oil use, leaving the sector particularly exposed to fuel price volatility and supply disruptions," the IEA said. Europe recorded the strongest growth among the major EV markets in January-June, according to the IEA. Sales rose by 30pc on the year in the first half. Germany sold 140,000 more electric cars than in the same period last year, while the UK and France sold around 100,000 and 95,000 more, respectively. "Across the European Union, electric car sales have grown to represent more than 30pc of total car sales during the first half of 2026, compared to 27pc in 2025," the IEA said. The share in the UK rose to 38pc. Globally, electric cars accounted for 24pc of all cars sold in the first half of this year, 1 percentage point higher than in the same period last year, the IEA said. It expects electric cars to account for 29pc of total car sales globally in 2026. The IEA said EVs are part of policy responses to higher oil prices because they can bolster energy security in oil-importing countries and help "shield consumers and businesses from price fluctuations". Hostilities between the US and Iran, which started at the end of February, and the closure of the strait of Hormuz have pushed global crude and oil product prices higher. The IEA pointed to "particularly hard-hit" regions such as southeast Asia, where governments have introduced temporary tax breaks for EVs, scrappage schemes and fleet electrification programmes to cut oil demand and buffer future price shocks. "Elsewhere, there are signs of a reaction among consumers. For example, Australia's [around] 34pc surge in gasoline prices earlier this year coincided with a near-tripling of electric car sales in April 2026 year-on-year," the IEA said. A weaker car market in China is set to weigh on global EV sales this year, the IEA said. "For the first time this decade, electric car sales are expected to stagnate in China compared with the previous year, even as over 60pc of total car sales are set to be electric, an all-time high," it said. But there is still potential for further growth outside China, according to the IEA. Electric car exports from China in January-June almost matched the level recorded during the whole of 2025. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.

US tariffs to cut Brazil's tallow exports

29/07/26

US tariffs to cut Brazil's tallow exports

Sao Paulo, 29 July (Argus) — New US tariffs are expected to curb Brazilian beef tallow exports to its largest overseas market, increasing domestic availability and potentially channeling more supply into biodiesel production. Brazilian beef tallow now faces a combined 37.5pc import tariff into the US, comprising a new 12.5pc duty imposed by the administration of President Donald Trump on 24 July and an existing 25pc tariff on Brazilian imports effective since 22 July. The feedstock has lost its competitive edge in the US Gulf coast market, which is a major demand center. Including beef tallow costs, freight costs for cargoes of up to 5,000 metric tonnes (t), the recently imposed tariffs and the value generated by the 45Z clean fuel production tax credit — which could be viewed as an additional cost since it only applies to US domestic feedstocks — imported Brazilian tallow carries an effective cost of around $1,936/t, according to Argus calculations. By comparison, US tallow at the US Gulf coast is available at roughly $1,700/t. Market participants expect only limited volumes of beef tallow to continue flowing to the US, primarily to producers that can take advantage of duty drawback provisions. These provisions allow some renewable diesel and sustainable aviation fuel (SAF) producers to recover duties paid on imported feedstocks when the finished fuel is subsequently exported to destinations such as Canada, Europe and other international markets. 1H export drop Brazilian tallow exports had fallen by approximately 40pc to 141,000t in the first half of 2026 from the same period in 2025, according to trade ministry Mdic data. This reflected the impact of previous US import tariffs, which created market uncertainty and disrupted trade flows to the product's primary export destination. Brazilian beef tallow prices are trending downward as export demand weakens following the closure of the US arbitrage. Further losses, however, are likely to be limited by production costs and slower cattle slaughter rates after Brazil filled its beef export quota to China, reducing tallow output. A drop in the price of the feedstock material will be insufficient to reopen the arbitrage opportunity to the US in the short term, according to traders. Falling beef tallow prices are likely to boost demand from biodiesel producers with the flexibility to process waste-based feedstocks. Tallow in Brazil's central-western Mato Grosso state is currently priced at R5,150 ($1,009)/t, a discount of R625/t to soybean oil, according to Argus indicators published on 24 July. But demand for the biofuel is not reacting as expected, given the backdrop of the conflict between the US and Iran, which has driven up fuel prices and altered economic dynamics worldwide. External demand With Brazil facing the highest tariff burden, US biofuel producers could increasingly turn to alternative sources of tallow, including Australia, New Zealand, and potentially Europe and other South American countries. More favorable tariff treatment for Asian suppliers could also support continued imports of used cooking oil (UCO) into the US, displacing some demand for tallow. But UCO arbitrage opportunities have narrowed in recent weeks, as the spread between origin markets and the US Gulf coast has become less attractive than it was in June. The US Environmental Protection Agency (EPA) finalized its record-high 2026 and 2027 biomass-based diesel blending mandates in March, covering renewable diesel, biodiesel, and SAF. The 2026 mandate represents a 60pc increase from the previous year, with targets set at 9.07bn renewable identification numbers (RINs) for 2026 and 9.20bn RINs for 2027. The announcement removed much of the uncertainty that had weighed on the industry throughout 2025 and provided a clearer demand outlook for biofuel feedstocks in the US. The higher mandates translated into stronger demand for feedstocks such as tallow on the US Gulf coast, where prices climbed to a record high of $1,995.81/t on 3 June. Elevated domestic prices opened arbitrage opportunities for imports during the first half of the year, supporting a recovery in overseas shipments. Although US tallow imports have yet to exceed their historical highs in 2026, they have rebounded significantly from lower levels early in the year. The recovery had boosted confidence among overseas suppliers, who expected import demand to continue strengthening through the remainder of 2026. But the new tariff measures have added fresh uncertainty to that outlook, raising questions about future trade flows and the competitiveness of different supplying regions. This has renewed attention on Europe as a potential destination for Brazilian tallow. European traders do not expect the US tariffs on Brazilian tallow to result in a significant increase in imports into the EU. Market participants had explored diverting Brazilian volumes to Europe when US tariffs reached 50pc in the second half of 2025, but shipments were limited, partly because veterinary approvals, certification requirements and border controls restricted market access. As a result, only small volumes arrived in early 2026 despite concerns over a potential influx. The latest 37.5pc tariff is therefore unlikely to change trade flows materially. Although Spain's RED III implementation is expected to support category 3 demand from 2027 by rewarding greenhouse gas emissions savings and leaving category 3 outside the 1.7pc Annex IX Part B cap, traders said freight costs, high energy prices and regulatory hurdles continue to prevent a viable Brazil-Europe arbitrage. Some market participants instead expect lower US imports from Brazil to support European exports to the US. Most European suppliers to the US do not expect an immediate impact from the latest tariff measures, noting it is too early to assess any shift in trade flows. Under EU animal-by-product rules, tallow is classified into categories 1, 2 and 3. Categories 1 and 2 are recognized as waste feedstocks under RED III Annex 9 Part B, while category 3, although not listed under Annex 9, remains an established biofuel feedstock. Typically, lower-grade category 3 tallow with 10-15pc free fatty acid (FFA) content is exported to the US, while higher-quality material with 5pc FFA or below is consumed within Europe. By Natalia Dalle Cort, Beatriz Pacheco, Anna Prokhorova and Jamuna Gautam Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.

Spanish HVO Class III demand to rise under RED III

29/07/26

Spanish HVO Class III demand to rise under RED III

London, 29 July (Argus) — Spain's newly adopted mandate implementing the EU's recast renewable energy directive (RED III) is expected to support demand for HVO Class III from 2027, traders said. Hydrotreated vegetable oil (HVO) Class III is made from category 3 tallow. On an EU level, RED III requires member states to achieve a 14.5pc reduction in greenhouse gas emissions from transport fuels or a 29pc share of renewable energy in transport by 2030. Under the directive, biofuels produced from feedstocks listed in Annexe IX can be double counted towards compliance with renewable energy-based mandates. But double counting does not apply under GHG-reduction mandates. There is a sub-target for Annexe IX Part A feedstocks such as palm oil mill effluent oil, while Annexe IX Part B feedstocks such as used cooking oil (UCO) are capped. Spain adopted a GHG reduction mandate in its RED III transposition, effectively ending the practice of double counting in meeting national biofuel obligations. As a result, obligated parties will need higher absolute volumes of renewable fuels to meet GHG reduction quotas, supporting demand for drop-in fuels such as HVO. In Spain, biodiesel blending is capped at 7pc and ethanol at 5pc. HVO can be blended at up to around 20pc into diesel while still meeting fuel standards. Strategic reserves agency Cores estimates demand for biofuels blended into diesel in 2025 at 1.92mn t, corresponding to a blend rate of 8.7pc by volume. It implies that around 40pc of biofuels blended into diesel in 2025 were double counted. Argus Analytics estimates Spain's HVO demand in 2025 at around 715,000t. Spain's new legislation also raised the sub-target for Annexe IX Part A biofuels from 1pc to 1.2pc, while retaining a 1.7pc cap on those made from Annexe IX Part B feedstocks. Category 3 tallow is not included in Annexe IX and is not eligible for double counting in any EU member. As a result, HVO Class III has typically traded at a discount to waste-based grades such as UCO-based HVO (HVO Class II), which generally also offers greater GHG savings — category 3 tallow offers GHG savings of around 72-82pc, depending on assumptions and yields, compared with about 85-90pc for UCO. Argus currently assesses Class II at a minimum of 85pc GHG savings and Class III at a minimum of 80pc. But with Annexe IX Part B feedstocks capped and double counting no longer available under Spain's GHG-based mandate, compliance value will be increasingly driven by GHG performance. For obligated parties, this will leave the higher GHG savings of HVO Class II as its main advantage over Class III, potentially narrowing the value gap between the two grades and improving Class III blending economics. Spain's producers are ready Spain's HVO production capacity, including standalone hydrotreatment units and co-processing facilities, totals about 900,000 t/yr. Repsol accounts for around 722,000 t/yr through two hydrotreatment plants and one co-processing unit. The producer regularly imports category 3 tallow to its hydrotreatment plant in Cartagena, according to ship-tracking data. Moeve operates two co-processing plants with combined capacity of roughly 86,000 t/yr and is set to add 500,000 t/yr of HVO and sustainable aviation fuel (SAF) production at Huelva in late 2026 or early 2027. BP also produces HVO through a co-processing unit, with capacity of about 109,000 t/yr. Further capacity is on the way, with Dreexo Energia and Alfa Laval expected to start up a 100,000 t/yr hydrotreatment plant next year. Beyond Spain Germany is already providing additional support for HVO Class III demand. The country recently decided to allow category 3 tallow under its GHG mandate from 2026, subject to a restrictive 0.3pc cap. Germany adopted RED III in April and retroactively ended double counting for Annexe IX biofuels in 2026. Since that change and with both biofuels capped, HVO Class II and Class III have increasingly been valued on a similar basis for compliance in Germany, depending on their respective GHG savings, traders said. Obligated parties would be expected to blend as much HVO Class III as possible before reaching the cap. The Argus HVO fob ARA Class III/II spread narrowed to around $15/m³ on 22 May, its tightest since 12 August 2025, which many market participants attributed to the policy change. This compares with an average spread of $72/m³ in 2025. Together, the Spanish and German policy changes could encourage greater movement of category 3 material beyond its traditional demand hubs in northern Europe. The wider European picture remains mixed. The Netherlands already limits incentives for category 3 tallow-derived biofuels, while France has proposed a 0.6pc cap from 2027 to avoid diverting material from other users such as the pet food, feed, oleochemical and pharmaceutical sectors. By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.

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