Biodiesel Market Trends

Growth Drivers

• Fuel innovations in production: New technologies for the production of biodiesel are increasing efficiencies and driving down costs, as well as making it increasingly more economical than traditional diesel. New advanced biofuel technologies such as hydrotreating and enzymatic processes have reached a point where the yield and quality of biodiesel can be significantly enhanced. In May 2023, Chevron Corporation revealed its plans to extend the renewable diesel production site by integrating new technologies that can help in scaling them up and reducing production costs.

• Growing application in the logistics sector: The rapid paradigm shifts towards sustainable fuels in the logistics market is a key factor in the biodiesel industry. New International Maritime Organization (IMO) rules introduced in March 2024, lowered the sulfur content allowed for ships, giving rise to demands for biodiesel as low-sulfur substitutes. This trend is also expected to continue as the transportation sector shifts to cleaner fuels.

• Feedstock availability and sustainability: The security of feedstocks in a sustainable manner, considering socio-economic issues, is one of the primary drivers for the market. Since vegetable oils and animal fats have dual uses-food purposes and biodiesel feedstock-there will be feedstock scarcity and high feedstock prices due to competition from food industries. This gets further exacerbated by low agricultural productivity. In 2022, a 5% increase in global vegetable oils demand further heightened the pressure that raw material availability would place on biodiesel production directly.

Challenges

• Regulatory uncertainty and trade barriers: One of the most important factors to deter the biodiesel industry growth is regulatory uncertainty, specifically with changing international regulations and trade barriers. These make competition quite indefinite and affect market stability every time there is a fluctuation in government policy on import tariffs or subsidies.

• Supply chain disruption: In December 2023, the imposition of U.S. tariffs on imports of Argentine biodiesel heightened disruptions in the supply chain due to changing market dynamics. Such changes in regulations may bring volatility, making long-term project investments tough for producers and, hence, slowing down the overall growth in the biodiesel market.