The HVO market in the European Union is evolving quickly with prices at highest for the last three years, not far from their 2022 levels. In 2024, it seemed that this market was being very LONG as investment were flourishing everywhere but now, this seems exactly the opposite.
Throughout 2024, the European market looked significantly long on HVO. Margins were at their lowest, major producers’ share prices were near bottom levels, and no anti-dumping duties applied to Chinese-origin HVO. Numerous projects were progressing toward Final Investment Decisions (FIDs), signaling confidence in future capacity growth and to some extent we were seeing an overcapacity on the market. At the same time, policy discussions were stable: no debate on removing double counting under the Renewable Energy Directive (RED), and electric vehicle adoption continued to accelerate, reinforcing expectations for renewable energy targets expansion.
Additionally, 2024 marked the real start of the regulated SAF market, with mandates beginning to take effect and airlines preparing for compliance. With biofuel supply seen as robust and policy frameworks supportive, the outlook appeared positive and oversupplied. Yet today, the market dynamic has shifted dramatically.
New developments
None of this holds true today. Several new developments have dramatically reshaped market dynamics:
Anti-dumping duties on Chinese HVO – Firm duties imposed since February 2025 – on China are between 21.7% and 35.5% for almost all players. These duties are creating a short on the market for projects which do not find a case where they can export or not below a certain price, or simply an artificial increase of prices of around +15%-25% ish.
RED II → RED III transition and double-counting uncertainty – From Q2 2025, EU member states began transposing RED III, accelerating compliance timelines and strengthening renewable transport targets. At the same time, the prospect that double counting may be phased out has pushed additional demand into conventional biofuels such as HVO — especially to break the current blend wall. While most changes will apply from 2027, most of the EU members states have already raised mandates for 2026.
Growing demand outside the EU - New mandates and policy roadmaps have emerged across South Korea, Japan, Malaysia, and China, driving structural demand growth in Asia. The future HVO/SAF output that was expected to flow toward Europe could now be absorbed regionally, tightening global supply availability for the EU, a scenario that will need to be closely monitored, given that we still have some doubts regarding the structural price of HVO/SAF.
Delayed or cancelled capacity - During 2025, industry players announced the cancellation of more than 2 million tonnes per year of planned HVO/SAF capacity – removing a significant portion of expected new supply from the 2026-2028 horizon.
Feedstock – for once – not the problem: In this context, feedstock is at stage “cheap” relatively to HVO. And therefore, we must expect an increase of HVO margins for European players, seeing margins that could reach around 600-700$/T in the course from now to H1-2026. On top of this, massive amounts still exists as the US closed its borders for imports of feedstocks.
Zooming on projects delayed or cancelled
Major players such as Shell, TotalEnergies and Repsol have either cancelled or postponed large‑scale HVO/SAF projects — more than symbolic signals for long‑term supply than short‑term issues, but they matter. Meanwhile, some new biorefineries that were expected in 2025 are now slipping into 2026 or beyond, which helps explain why markets are reacting with upward HVO pricing.
- BP’s plan for a standalone biofuels facility at its Rotterdam refinery was officially cancelled in September 2025. None of the planned standalone HVO/SAF plants has reached Final Investment Decision (FID): the Rotterdam site, plus others such as Kwinana (Australia), Lingen (Germany) and Cherry Point (US) were either paused or shelved.
- Shell’s planned ~820 kt/year biofuels complex in Rotterdam has been abandoned, following a suspension of work in mid‑2024.
- TotalEnergies’ Grandpuits site in France, initially slated for ~400 kt/year of HVO/SAF in 2025, has been delayed and scaled down: phase 1 (210 kt/year) now due early 2026; phase 2 (75 kt/year) targeted in 2027 — total ~285 kt/year rather than 400 kt/year.
- Repsol’s Puertollano renewable fuels plant — about ~200 kt/year capacity — is now expected in 2026 instead of 2025.
Hypotheses:
1. SAF additional demand comes from ReFuel targets increasing from around 2% to 2.6% in the European Union
2. HVO additional demand mainly comes from average mandates increased around 0.8% increase and other assumptions on how this increase will be captured.
What is also new in 2025?
In 2025, market dynamics for HVO have changed beyond just supply and demand. This growing paper market of HVO creates greater price visibility, but also enhances speculation and short-term volatility, as traders react to news, and mandate updates.
Will prices go down? Outlook for HVO and SAF
Short-term (2025–early 2026)
The answer is likely no. Prices continue to move in response to market sentiment and speculative positioning. Traders are already pricing in the expectation of more favourable mandates for 2026, as EU member states adjust RED III implementation and strengthen renewable targets. This short-term optimism keeps HVO and SAF prices elevated, despite temporary increases in supply from operating biorefineries.
Medium-term (H2 2026 – 2027)
Looking further ahead, the European market is expected to see approximately 1.1 million tonnes of new HVO/SAF capacity coming online. In addition, several existing refineries across Europe are expanding co-processing capabilities. Traders are increasingly leveraging these co-processing opportunities to market HVO-blended diesel more actively, creating new trading flows within the continent. As a result, we anticipate significant cross-border movements, from production hubs in Sweden and Spain to other European markets.
Additional capacities come partly from units that entered service this year (e.g., Preem) and partly from forecasted projects for next year (Total Grandpuits, Preem expansions, ENI, Moeve, Galp), as well as but not taking to account, some announced overseas projects that have not yet reached operational status, including several in Asia and South America. In reality, many of these capacities are delayed, so forecasts need to be adjusted accordingly. A reasonable assumption is that most projects will experience an average delay of about one year before they actually contribute to market supply.
Can We Expect Prices to back to “Normal”?
While planned projects could make the market structurally long, large plants such as Neste’s 1.3 Mt/year Rotterdam facility may face delays, and not all capacity will run at full speed immediately.
Regulatory frameworks such as RED III, ETS II, and ReFuel mandates provide a degree of predictability, but supply uncertainties and continued reliance on Chinese imports mean that prices are unlikely to fully normalize. Maintenance, operational issues, and the gradual ramp-up of new capacities from non-restricted countries like Malaysia, Korea, Indonesia, and Brazil will continue to drive price fluctuations, with short-term spikes likely until these new volumes and export flows are fully integrated into the market.
