16/12/25
Viewpoint: European HVO prices unlikely to ease in 2026
Viewpoint: European HVO prices unlikely to ease in 2026
London, 16 December (Argus) — Northwest European hydrotreated vegetable oil
(HVO) premiums have firmed on the year in 2025, setting the stage for continued
strength as the market braces for higher blending targets in 2026. Premiums
strengthen ahead of 2026 targets The Argus HVO Class II fob ARA premium to
gasoil averaged $1,075/m³ during January-November, compared with $683/m³ in
2024. The premium firmed to $1,650/m³ on 21 October — a more than three-year
high — driven by stronger demand from obligated parties rushing to meet RED
targets before the end of the year. Increased consumption against relatively
stable production has tightened supplies, and planned maintenance closures at
European and Chinese facilities during the fourth quarter may continue to
support values into early 2026. Germany's planned legislative changes in 2026
abolishing double-counting of Annex IX feedstocks could significantly boost HVO
demand, as higher absolute volumes of biofuel will be needed to meet GHG
reduction quotas, which then supports demand for drop-in fuels like HVO. The
Netherlands is also planning an end to double counting and a switch to a
greenhouse gas savings-based mandate, which could amplify demand in 2026.
Trading activity reflects the bullish demand outlook — 888,000t of Class II
futures traded on Ice in October, surpassing the previous record of 717,500t in
June. Open interest now extends to December 2026, signalling confidence in
sustained liquidity. Spot market activity has also picked up in 2025, with Argus
Open Markets (AOM) volumes traded for HVO Class II reaching 122,000t in January
to November 2025, surpassing the 2024 total of 44,000t. Producers tilt towards
HVO over SAF EU sustainable aviation fuel (SAF) targets kicked in at 2pc this
year and with this, producers are recalibrating output strategies. Definitive EU
anti-dumping duties on Chinese biodiesel and HVO were imposed in February , and
EU anti-dumping and anti-subsidy measures already apply to HVO and biodiesel
originating from the US and Canada. The China duties do not apply to SAF, but US
duties do. HVO and SAF are made from oils and fats via hydrotreatment, but HVO
requires fewer processing steps, usually making it the cheaper grade. But HVO
Class II has often maintained a premium over SAF throughout 2025 because of
different market fundamentals. This encouraged European producers to maximise
HVO output over SAF. But tight SAF supply towards year-end — driven by export
restrictions from China — pushed SAF premiums above Class II, with the SAF
premium over HVO averaging $292/t in November. In October, some additional
Chinese producers secured SAF export licences, and with the SAF mandate
remaining at 2pc in 2026, European producers are expected to favour HVO
production while SAF imports from duty-free China and Singapore fill the gap.
The UK Trade Remedies Authority said in late November that it plans to recommend
that the government places countervailing duties on US-origin HVO from March.
Imports of US HVO into the UK have already declined this year because of the
ongoing investigation, and participants expect volumes to fall further. To meet
mandates, the UK is expected to lean more heavily on used cooking oil-based
biodiesel, while some blenders may also look to secure supply from Nordic
producers. By-products soften The Argus bionaphtha fob ARA price averaged
$1,541/t in January-November, compared with $1,675/t across 2024. Despite the
decline, premiums have recently been supported by stronger HVO and SAF prices,
with used cooking oil-based bionaphtha a viable drop-in blending alternative to
meet mandates. Looking ahead, participants expect that firm HVO prices will
sustain higher bionaphtha premiums in 2026, while voluntary demand, particularly
from petrochemical manufacturing, could provide additional support to the
market. The biopropane premium to its propane counterpart at the ARA hub fell
during 2025, with third quarter levels hitting record lows since Argus began the
assessment in October 2023. Argus biopropane fca ARA outright averaged around
$1,408/t in January–November, down from $1,597/t in 2024. Although HVO and SAF
output have boosted biopropane supply, demand remains constrained without
mandated use. Looking ahead, premiums are expected to stay capped unless
government incentives accelerate adoption . By Evelina Lungu Send comments and
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