Rotterdam HEFA refinery fire sparks HVO price surge, signals SAF volatility risk for 2025

As Europe's renewables market cools after Rotterdam refinery fire, David Elward, Pricing Director Energy Transition at General Index, reflects on the need for aviation fuel players to blend fossil and biojet market dynamics ahead of SAF mandates next year.

The biofuel market in Europe appears to be on the way back to a semblance of normality, after a fire at a key renewable fuels producer in Rotterdam earlier this month sent prices spiking. The incident hit supplies of renewable diesel (aka HVO), not sustainable aviation fuel, but it’s put the aviation fuel markets on notice of new angles to supply disruption and price shocks to consider, as it gears up to the introduction of SAF mandates in the region from 2025.

General Index (GX) data shows while the price of fossil jet fuel in Northwest Europe has been largely rangebound in recent months, SAF prices started to creep up through October, and has rallied more sharply this month – the market seemingly not entirely insulated from the renewable diesel disruption.

Europe biorefinery fire spikes HVO prices, SAF decouples from fossil jet fuel

Fossil jet fuel prices for the barge market in and around the Amsterdam-Rotterdam-Antwerp trading hub have risen by 3% since September, whereas SAF – which is priced as a premium to the fossil fuel market – shot up by 24%.

GX Jet Fuel FOB NWE Barges averaged $694.75/mt in September, $718.50/mt in October, and has averaged $717.00/mt over 1-22 November. The premium for RED SAF Neat HEFA NWEFOB Barges vs Jet Fuel NWE FOB Barges averaged +$1,056.50/mt in September, +$1,109.75/mtin October, and +$1,315.00/mt over 1-22 November.

HVO, SAF’s stablemate in the renewable products ecosystem, has been even stronger in recent weeks, after a refinery outage in Rotterdam sent shock waves through supply chains.

GX assessed HVO Class II NWE FOB Barges on an outright price basis at an average of $1,566.00/mt in Sep, $1,670.25/mt in October, and $2,158.75/mt over 1-22 November – up by some 38%.

A fire at Neste's Rotterdam refinery on 8 November temporarily halted production, impacting renewable diesel deliveries. It resulted in the leading green fuel producer revising its 2024 sales guidance for renewable products overall down to 3.7 million tonnes from 3.9 million tonnes. Neste said it SAF sales target (between 350,000-550,000 tonnes in 2024) and the expansion work at Rotterdam were unaffected.

SAF is produced along with HVO in a technology process known as HEFA – which stands for Hydrotreated Esters and Fatty Acid. Feedstocks are predominantly Used Cooking Oil (UCO) and Animal Fat Tallow. Production can be optimised or ‘swing’ between HVO or SAF. So when one product, in this case HVO, is affected, there can be a ripple effect across the HEFA complex to  also impact the co-product, SAF.

Fossil jet meets bio-jet in new dynamic for aviation fuel suppliers

For decades, aviation fuel market participants – those either active across the physical supply chain or anyone managing derivatives positions – have become used to tracking certain factors which could affect price. In broad terms, those are supply fundamentals for crude oil-derived jet fuel and the wider global oil markets, and demand influences in the aviation sector. The Covid pandemic was a recent extreme case in point, when stay-at-home orders saw travel demand plummet, initially leaving an excess of jet fuel, which was followed by a prolonged period of supply recalibration, and then a long road to full recovery which lasted several years.

With the post-pandemic aviation revival largely secured, the industry has been able to look ahead to new targets: namely, continued expansion, and a decarbonisation strategy based on achieving net zero by 2050. SAF has been earmarked as the crucial level to ensure emissions fall, and 2025 is shaping up to be a pivotal year on this journey.

A key plank of the transition to SAF deployment in the European Union and United Kingdom are mandates for SAF supply. From 2025, the region, which accounts for close to 20%of global aviation demand, will incorporate a 2% SAF Blend into the fuel pool. That’s the equivalent of approximately 1.25million MT of SAF which suppliers will need to source next year. The mandate falls on obligated suppliers, though airlines and their customers will ultimately pick up the tab.

Europe is expected to meet the required SAF volumes through a combination of domestic production (both neat SAF and co-processing) and imports from overseas producers. For many fuel suppliers and their airline clients, preparations for mandates will have been months if not a some years in the planning. For others, efforts to ensure they get their hands on the required volumes will ratchet up, and could see a scramble to secure SAF in the spot market next year.

Aviation fuel players will continue to track key dynamics affecting the market, such as the substantial volumes arriving each month from suppliers in the Mideast Gulf, India, Korea and China. With the dawn of SAF, traders, airlines and fuel producers will also now be keeping at least one eye closely on the biofuels world.

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