S&P Global Platts Launches First Hydrotreated Vegetable Oil (HVO) values in Europe

Rhea-AI Summary

S&P Global Platts has launched first-to-market hydrotreated vegetable oil (HVO) values in Europe as of November 10, 2020, enhancing price transparency amid the industry's shift to lower carbon fuels. The daily assessments, based on used cooking oil costs, average $1,388.5 per metric ton, reflecting a premium over ultra-low sulphur diesel's $332.6. Demand for HVO is expected to rise to over 3 million metric tons by 2030, driven by stringent EU emission targets. This initiative is part of Platts' response to increasing market needs for renewable fuel pricing.

Positive

• Launch of daily HVO price assessments increases market transparency.
• Anticipated HVO demand growth to over 3 million metric tons by 2030.
• Higher HVO values support sustainability efforts and meet environmental targets.

Negative

• HVO prices at approximately 4.2 times the cost of ultra-low sulphur diesel could deter market participation.
• Strict limits (7%) on biofuel composition in diesel pose challenges for meeting EU mandates.

LONDON, Nov. 10, 2020 /PRNewswire/ -- S&P Global Platts ("Platts"), the leading independent provider of information and benchmark prices for the commodities and energy markets, has launched first-to-market hydrotreated vegetable oil (HVO) values in Europe. These daily assessments, which have been provided to the market since August 17, bring additional transparency to the market as the transport industry embraces the energy transition towards less-carbon intensive energy sources. The daily S&P Global Platts HVO cost-based price assessments reflect the cost of HVO produced from used cooking oil on an ex-refinery basis in Northwest Europe. The daily price assessments are published in dollars per metric ton (mt).

Ian Dudden, Global Content Director, Metals & Agriculture at S&P Global Platts, said: "The EU has clearly signified the direction of travel for policy over the next 10 years and even the next 30 years with a revised Renewable Energy Directive and an ambitious Green Deal. These set binding targets for inclusion of 14% of renewables in transport and to cut emissions up to 55% by 2030 compared to 1990 levels, with the EU envisaging carbon neutrality by 2050. As greenhouse gas-based mandates intensify across Europe, and with COVID continuing to cause market uncertainty, we are seeing increased demand for price transparency in renewable fuels such as HVO. These new HVO assessments provide transport market participants with the conviction to trade in changing markets."

Platts has observed growing interest in renewable fuels across the transportation markets in part driven by the transition to lower carbon fuels. While spot markets in many of these commodities have not yet reached sufficient volumes to support spot price assessments, Platts has analyzed the cost structures involved and is now publishing calculated values for HVO.

Over the past three months, the Platts Northwest European HVO assessments were approximately 4.2 times the price of ultra-low sulphur diesel, having averaged $1,388.5/mt, while the Platts ultra-low sulphur diesel assessments in the same region averaged $332.6. The HVO premium reflects the desire among many companies to increase the sustainability of the fuel they use, as well as meet national environmental targets. The launch follows extensive consultation of producers, consumers, traders and others in the European biofuel markets as the demand for renewable diesel grows in consumption and supply.

"European HVO demand is forecast to increase to more than 3 million mt for road transport alone in 2030, up from 2 million mt in 2020, with the majority of the production made out of waste and residues," added Patricia Luis-Manso, Head of Agriculture & Biofuels Analytics, S&P Global Platts. "At the same time, HVO capacity is expected to nearly quadruple globally over the same period."

Hydrotreated vegetable oil, commonly referred to as renewable diesel, is produced via hydroprocessing of oils and fats and can be used as an alternative fuel in diesel engines, offering more than 90% greenhouse gas (GHG) savings compared to fossil-based diesel. Rising EU-wide emission reduction targets and higher biofuel blending mandates have been a key focus in the European biomass-based diesel market in 2020 as the EU tries to reduce the carbon footprint of the road transport sector. With mandates increasing year-after-year but diesel specifications in Europe not allowing for more than 7% of the fuel to be comprised of a biofuel, meeting these targets is becoming increasingly difficult.

The HVO assessment calculation assumptions, provided by Platts Analytics, are based on existing Platts assessments and other fixed costs. The HVO inputs are Used Cooking Oil CIF and Hydrogen Netherlands SMR added to fixed renewable diesel refinery costs, then deducting the byproduct credits to include FOB ARA Propane and Naphtha CIF NWE cargoes. Platts will review the specifications and assumptions going forward based on market feedback and as both markets develop.

About S&P Global Platts
At S&P Global Platts, we provide the insights; you make better informed trading and business decisions with confidence. We're the leading independent provider of information and benchmark prices for the commodities and energy markets. Customers in over 150 countries look to our expertise in news, pricing and analytics to deliver greater transparency and efficiency to markets. S&P Global Platts coverage includes oil, gas, LNG, power, petrochemicals, metals, agriculture and shipping.

S&P Global Platts is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.platts.com.

 

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SOURCE S&P Global Platts

FAQ

What are the new hydrotreated vegetable oil values launched by SPGI?

S&P Global Platts launched daily assessments for hydrotreated vegetable oil (HVO) values in Europe to provide market transparency.

When did SPGI start providing HVO price assessments?

SPGI began providing HVO price assessments on August 17, 2020.

How much do the HVO assessments average according to SPGI?

The HVO assessments average $1,388.5 per metric ton in Northwest Europe.

What is the forecast for HVO demand by 2030 according to SPGI?

HVO demand in Europe is forecasted to reach over 3 million metric tons for road transport by 2030.

How do the HVO prices compare to ultra-low sulphur diesel?

HVO prices are approximately 4.2 times the price of ultra-low sulphur diesel, which averages $332.6 per metric ton.