Biodiesel used as a marine fuel has fallen to a record low price this week, making it cheaper than most conventional shipping fuels as the conflict in the Middle East pushes up diesel costs, Financial Times reported.
The price of biodiesel at Rotterdam, the world’s largest biofuel production cluster, dropped to as low as $985 per tonne on Monday, according to pricing agency Argus. This was the lowest level recorded and marked a sharp decline from the $1,388 per tonne seen in July.
Prices have since recovered to around $1,240 per tonne. The decline was driven by biodiesel producers cutting prices to increase sales and help meet emissions targets under European Union regulations.
The price movement contrasts sharply with marine gasoil, one of the key fuels used by the shipping industry. Its price climbed to $1,528.50 per tonne this week, compared with $714.50 per tonne before the Iran war began in February, amid increasing disruption to fuel supplies.
Argus said that once the cost of complying with EU carbon-emission requirements and maritime carbon permits is taken into account, biodiesel is cheaper than “almost all” conventional marine fuels.
The unusual shift in relative fuel prices could encourage shipowners to increase their use of biofuels as regulatory pressure on the shipping sector to cut emissions continues to grow. Shipping currently accounts for around 3% of global greenhouse gas emissions.
“This surprising new development” could prompt shipowners to reassess their fuel strategies because bio-marine fuels can in some cases become cheaper than marine gasoil after accounting for emissions savings available under EU schemes, said Madeleine Jenkins, European biofuel pricing specialist at Argus.
Biofuels have emerged as one of the more readily available options for shipping companies seeking to reduce emissions. They can be produced from crops as well as organic waste and can generally be used either in blends with conventional marine fuels or in pure form, requiring limited modifications to vessels.
However, biofuels have a slightly lower energy density than conventional marine fuels. Ships therefore need to consume about 7% to 10% more fuel for the same journey.
A substantial share of biodiesel supplied in Rotterdam, the world’s second-largest ship-fuelling hub after Singapore, is produced from waste-based feedstocks. These include palm oil mill effluent from Southeast Asia and used food oil. The use of such feedstocks has largely insulated biodiesel prices from this year’s increase in fossil fuel costs.
Marine biodiesel blend sales in Rotterdam increased sharply year on year during the second quarter of 2026 and more than doubled compared with the previous quarter. The increase was driven by higher diesel prices linked to the Iran war and the implementation of Dutch regulations under the EU’s Renewable Energy Directive III.
Under the Dutch rules, marine fuel suppliers must progressively reduce the emissions associated with the fuels they sell. Suppliers that are behind their annual targets have reduced prices to increase biofuel sales and meet their compliance requirements.
The EU Emissions Trading System and FuelEU Maritime regulation have also altered the economics of marine fuels by increasing the cost associated with carbon-intensive fuel use.
Biofuels have an advantage over alternatives such as methanol and ammonia because existing ships can adopt them relatively easily. Jason Stefanatos, global decarbonisation director at maritime classification group DNV, described biofuels as “pretty much a drop-in solution”, noting that most modern marine engines can use them with little or no retrofitting.
Some vessels may still need modifications, such as dividing fuel tanks to accommodate biofuel and conventional fuel separately or changing onboard operating procedures. However, Stefanatos said these requirements were not a major obstacle.
Despite the recent growth, biofuels continue to represent only a small share of global shipping fuel consumption. DNV estimates that they account for around 0.6% of shipping fuel use, although their adoption has increased rapidly since 2021.
Limited availability of sustainable feedstocks remains one of the constraints. Shipping competes with road transport and the aviation sector for these feedstocks. EU regulations have also restricted the materials eligible for emissions benefits amid concerns that food crops could be diverted towards fuel production.
“It is a fuel that will definitely play a role in the future,” Stefanatos said, while noting that its eventual share of the shipping fuel mix would depend heavily on price and availability.
Argus estimates that demand for advanced unblended biodiesel in Rotterdam could reach around 250,000 tonnes this year. That would represent more than 40% of the estimated 600,000-tonne global marine biodiesel market.
Global biodiesel production stands at just under 4 million tonnes, although the output serves sectors beyond shipping as well.
