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Shipping biofuels: navigating new challenges with strategic solutions
The global biofuels market has witnessed massive growth over the last two decades, largely driven by evolving regulations and the push for cleaner energy. Volumes have increased close to 400% since 2007, when the market totalled 5mn t/yr compared with the 25mn t/yr it represents today, with the sector incorporating an increasing range of feedstocks and cargo types. Yet shipping these fuels is complex as biofuels primarily rely on the chemical tanker market, which is already in high demand for transporting traditional chemical cargoes.
As global demand for biofuels has risen, securing reliable shipping solutions has become complex and costly. In order to navigate this shifting landscape, industry participants will need to adopt proactive strategies that mitigate supply chain risks and ensure long-term stability.
The challenges of shipping biofuels
Today’s chemical tanker freight market is more fluid and volatile compared with the last decade, when fluctuations in freight were more limited. We are now seeing the global transport of biofuels faced with a multitude of freight-related challenges, including:
1. Limited availability of tonnage
Chemical tankers, the primary vessels for biofuel transport, are facing some supply constraints due to a combination of geopolitical influences, regulatory pressures, and a lack of forward orderbook. Over the past 12+ months, the rerouting of volumes around the Cape of Good Hope and away from the Red Sea, has further shortened tonnage availability, leading to higher freight rates and fuelling supply chain disruption.
2. Competition for chemical tanker space
The absence of a dedicated biofuel shipping fleet adds complexity to the sector, forcing producers to develop more advanced procurement strategies. As demand for biofuels surges, so too does the competition for already-limited freight options as biofuel producers and customers compete with traditional chemical cargoes, creating additional freight bottlenecks.
3. Regulatory impact on freight costs
Demand in the biofuels market is driven primarily by regulation. Subsequently, the sector is facing additional hurdles in securing competitive freight as it strives to meet government mandates and net zero ambitions in a cost-effective manner. Furthermore, recent policy changes – such as Europe’s restrictions on palm oil based biofuels, anti-dumping duties on Chinese imports, and US trade tariffs on biofuel feedstocks – have forced producers to adapt to new supply chain realities. Shipping strategies that are not taking regulation into account will come unstuck. Building flexibility into long-term logistics plans is now essential for mitigating risk when the goalposts are changing regularly.
4. Demand uncertainty in the wake of US Trade Tariffs & Escalating Trade Tensions
US tariffs could lead to some demand destruction in the short term on US focused biofuel trade lanes, as the sector navigates the best pathways to ensure ongoing supply for domestic Renewable Diesel/Sustainable Aviation Fuel production. This means that Chinese produced Used Cooking Oil volumes and tallow volumes from Brazil, Australia, New Zealand, Uruguay and Canada may in turn have to find a new home. Secondly to this, questions over the future of the 45Z Regulation in the US remain unresolved with any watering down of the measure impacting biofuel demand further.
With various factors effecting freight rates in the short term and posing a potential threat to supply chain stability, how can market participants secure reliable and cost-effective shipping solutions for biofuels?
Securing long-term freight cover is very important in a market that continues to face uncertainty and disruption. We need to be looking at different procurement strategies in order to achieve these goals and maintain a cost-effective freight environment. At Clarksons, we are able to give you that foresight and advice. Our global footprint and broad experience across all major shipping sectors allows us to draw on an unmatched network and knowledge base to advise, design and execute strategies that meet your future freight aspirations while mitigating your exposure going forward
Josh Saxby, Director, Specialised Products
Taking a strategic approach to freight procurement
With booming biofuel shipping volumes and tightening chemical tanker availability, it is crucial for producers and customers to develop secure long-term freight strategies that will help mitigate rising costs and combat disruption. The Specialist Products team at Clarksons has extensive experience in advising biofuel producers and traders on how to navigate this increasingly volatile landscape by providing expert insights and tailored shipping solutions, including:
● Long-term chartering strategies to lock in stable freight costs in volatile markets
● Market intelligence to help producers anticipate freight trends and mitigate risk
● Innovative shipping solutions (e.g. investment in tonnage and strategic partnerships) to secure reliable transportation
Continuing the conversation
The Argus Biofuels & Feedstocks Asia Conference (22 to 24 April 2025, Singapore) will bring together over 400 senior decision-makers to discuss the evolving biofuels shipping landscape and explore actionable and effective strategies. We are delighted to be gold sponsors of the event and be a part of the conversation. Josh Saxby will discuss how trading firms can manage risk against a changing environment and the impact on the movement of feedstocks in a panel with Repsol and Mitsui & Co. Find out more about the Argus Biofuels & Feedstock Asia Conference
Clarksons is hosting a webinar ahead of the event to provide an introduction to shipping biofuels, providing a strong foundation of understanding, along with an opportunity for Q&A. The webinar is free to attend and can be watched live or on demand. Register here.