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The price of biodiesel for shipping has fallen to an all-time low this week and is cheaper than most conventional marine fuels, as the conflict in the Middle East drives up diesel costs.
The cost of the alternative fuel at the port of Rotterdam, home to the world’s largest cluster of biofuel production, fell as low as $985 a tonne on Monday, according to pricing agency Argus, the lowest on record and down from as much as $1,388 in July, as producers cut prices to boost sales and help meet their EU emissions targets. It has since rebounded to $1,240.
That comes as the cost of marine gasoil, a key shipping fuel, has soared to $1,528.50 per tonne this week from $714.50 per tonne just before the start of the Iran war in February, amid growing disruption to supplies.
When the cost of complying with EU limits on carbon emissions for shipping fuels and the price of maritime carbon permits was included, biodiesel was cheaper than “almost all” conventional shipping fuels, Argus said.
The unusual price reversal could accelerate the shipping industry’s adoption of more environmentally friendly biofuels, analysts said, as regulatory pressure mounts for it to cut its emissions. The industry accounts for about 3 per cent of greenhouse gas emissions globally.
This “surprising new development” should encourage shipowners “to rethink their fuel strategies, as bio-marine fuels can often be cheaper than marine gasoil after accounting for the net emissions savings available under EU schemes”, said Madeleine Jenkins, European biofuel pricing specialist at Argus.
Biofuels can be used in most vessels with few modifications, either as a blend with conventional fuel or in their pure form, and have emerged as one of the sector’s most readily available options for cutting emissions. They can be made from crops or organic waste but have a slightly lower energy density than conventional fuels, meaning that ships must burn about 7 to 10 per cent more fuel per journey.
A significant proportion of the biodiesel sold in Rotterdam, the world’s second-largest hub for ship fuelling after Singapore, is produced from waste products such as palm oil mill effluent from south-east Asia and food waste oil, meaning that biodiesel has largely been unaffected by this year’s rise in fossil fuel prices
Sales of marine biodiesel blends in Rotterdam rose sharply year on year in the second quarter of 2026 and more than doubled from the previous three months, driven by surging diesel prices pushed up by both the Iran war and the introduction of Dutch rules implementing the EU’s Renewable Energy Directive III.
The Dutch rules require marine fuel suppliers to reduce the emissions associated with the fuels they sell, with the target becoming progressively tougher over time. Suppliers not on track to meet this year’s target have cut prices in order to sell enough biofuel to comply.
The EU’s Emissions Trading System and FuelEU Maritime regulation have also changed the economics for shipowners by putting an increasing cost on carbon intensive fuels.
The advantage of biofuels compared with other alternative fuels such as methanol or ammonia is that they are simple for the existing fleet to adopt. Jason Stefanatos, global decarbonisation director at maritime classification group DNV, described them as “pretty much a drop-in solution”, saying most modern marine engines could burn them with little or no retrofitting.
Ships could still require changes such as splitting tanks into two to store both biofuel and regular shipping fuel or adjustments to onboard procedures, but these were “not a showstopper nor particularly cumbersome”, he added.
Nevertheless, biofuels remain a tiny part of the global shipping fuel market. DNV estimates they account for about 0.6 per cent of shipping fuel use, despite uptake having grown rapidly since 2021.
This is in part the result of competition with other sectors such as road transport and increasingly aviation for limited sustainable feedstocks. EU rules restricting which materials can qualify for emissions benefits — because of fears over food crops being diverted into fuel production — have also constrained supply.
“It is a fuel that will definitely play a role in the future,” Stefanatos said, but the extent of its contribution to the shipping fuel mix would “depend heavily on price and availability”.
Argus estimates that demand for advanced unblended biodiesel in Rotterdam could reach about 250,000 tonnes this year, or more than 40 per cent of an estimated 600,000-tonne global marine market. Global production is just under 4mn tonnes, although this also supplies industries other than shipping.
