Viewpoint: European marine biodiesel demand to firm

Marine biodiesel bunkering demand in Europe could rise in 2024, as a result of the International Maritime Organisation's (IMO) first assignment of energy efficiency "grades" for vessels and the extension of the EU's Emissions Trading System to the shipping sector.

Market participants expects firmer marine biodiesel bunkering demand in the first half of 2024 on the back of the new regulations.

IMO's CII regulations means that vessels will be graded from A to E in 2024, which will represent their operational energy efficiency in 2023. Bunkering marine biodiesel can enhance a vessel's rating as it reduces the CO2 emissions from fuel consumption and allow non-compliant ships to avoid fines and increased refinancing costs.

In January 2024 the EU's Emissions trading system (ETS) will cover CO2 emissions from large ships. Using a biofuel component in a marine biodiesel blend will have an emission factor of zero under the EU ETS scheme, making it a lucrative option for shipowners looking to minimise their exposure to EU ETS regulations.

The marine biodiesel market is tiny compared with the conventional marine fuels market, but demand has stayed steady on the year in 2023 at around 520,000t, triple the volumes sold in 2021, according to data from the Port of Rotterdam. This compares with about 6.77mn t of conventional fossil bunker fuels sold at the port in the first nine-months of this year.

Some participants reported that demand for marine biodiesel may firm further in 2025 as shipping firms will have to use ETS allowances covering 70pc of their reported emissions, while allowance availability tightens. The FuelEU maritime initiative which is set to start in 2025, could also support demand.

But others expects a more marginal rise in marine biodiesel consumption on the back of thinning biofuels subsidy tickets values for the shipping sector in Amsterdam and Rotterdam.

New markets

An increasing number of suppliers in the northwest European bunkering hub of Amsterdam-Rotterdam-Antwerp (ARA) have been offering marine biodiesel blends, with a spot market emerging there and also the west Mediterranean.

This prompted the indexation of northwest European calculated biodiesel and very-low sulphur fuel oil (VLSFO) prices and the launch of the first market-led marine biodiesel blend price in the west Mediterranean.

B24 dob Algeciras-Gibraltar is a spot price assessment launched on 1 November, comprising a blend of 24pc used cooking oil methyl ester (Ucome) and 76pc very low sulphur fuel oil (VLSFO). It was assessed at an average of $779.31/t in November and around $763/t in December so far, or an average November premium of $168.30/t and December premium of around $182/t to conventional dob VLSFO in the west Mediterranean bunkering hub of Gibraltar-Algeciras-Ceuta. It was also marked at a premium of about 2.25pc ($17/t) to Argus B30 (Ucome) fob ARA, and a 16.94pc ($112.69/t) premium to the B30 advanced Fame 0°C CFPP dob ARA in November.

Demand for northwest European marine biodiesel blends slipped in November on the back of slower seasonal demand and price uncertainty in the underlying conventional VLSFO market in ARA. Meanwhile, trading for Ucome thinned in recent weeks as demand shifts towards rapeseed oil which has better winter properties. Market participants reported an uptick in demand for the B30 advanced fatty acid methyl ester (Fame) 0°C CFPP blend towards the close of the year on the back of the announcement from the Dutch government reducing the subsidy multiplier for biofuels in maritime shipping to 0.4 from 2024.

By Hussein Al-Khalisy