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This guide explains the key macroeconomic, regulatory, and logistical factors shaping the biofuel shipping market and why understanding these forces is critical for industry stakeholders. The article aims to provide clear, practical insights to help maritime professionals and energy market participants navigate the evolving biofuels landscape.

Supply trends and market demand

In any shipping market, there are key macro demand drivers that govern how the market will develop in any short- or medium- to long-term outlook. The biofuels market is no different. Here are the four key factors shaping supply trends and market demands for biofuels, and therefore governing access to tonnage for biofuels:

  • Global biofuel production
    As biofuel production (i.e. supply) increases, shipping demand also increases. This is particularly when supply and demand are in different regions. In short, when more biofuels are being produced, there is more cargo to move and so more ships needed to move them.

  • Trade flows
    While use of biofuels is global, its production tends to be more geographically concentrated. In particular, India, Indonesia, Brazil and the US have strong production capacity. Therefore, shipping is required for the import and export of biofuels (i.e. moving the fuel from where it was produced to where it will be consumed), for example from Brazil to Germany. Put simply, some countries produce more biofuels than they consume and other countries consume more biofuels than they produce. As a result, shipping is required to move the fuel between regions.

  • Regional consumption patterns
    As we explained above, shipping is required to move biofuels between the region where they are produced and the region where they are consumed. The greater the distance between the supply market and demand market – the higher the shipping volumes. It is therefore interesting to note that the OECD‑FAO Agricultural Outlook 2025‑2034 report suggests that most biofuel markets are anticipated to be largely self-sufficient in the coming decade, predicting that the amount of biofuel production traded internationally will be relatively small.
  • Policy and decarbonisation pressures
    The green transition is well underway across the maritime industry, incorporating a range of mandates, measures and emissions targets all aimed at decarbonising shipping. Renewable energy targets (and the penalties for not meeting them) are driving the use of biofuels across the world fleet. For example, FuelEU Maritime which came into force on 1 January 2025, requires vessels to use lower greenhouse gas intensity (GHGi) fuels or face expensive fines. This has driven up demand for biofuels across the maritime industry, particularly as FAME-based biofuels can be blended with conventional fuels to lower the overall GHGi intensity. In short, decarbonisation regulation creates demand for biofuels, which in turn creates demand for shipping.

 

Combined, these factors not only impact supply trends and market demands for biofuels, but also affect fleet demand (i.e. how many and what types of ships are needed to transport the biofuels).

Regulatory pressures

 

Regulatory pressures are one of the strongest drivers of biofuels shipping, turning decarbonisation from a voluntary choice into a compliance requirement. Increasing decarbonisation regulation prompts companies to:

  • Use biofuel blends to reduce reported emissions
  • Prove fuel sustainability and lifecycle emissions
  • Collect and report fuel / emissions data
  • Meet regulational requirements to avoid significant financial penalties

 

Combined, these facts shape market behaviour by:

  • Creating demand for biofuels, making them commercially attractive even when more expensive than fossil fuels
  • Changing trade flows
  • Rewarding flexible fleets which can use biofuel blends that are approved under the regulations
  • Pushing up biofuel prices as shipping competes for supply with the aviation and road transport industries

 

The growth of biofuels is largely happening due to government regulation and individual producers who have their own net-zero and carbon emissions targets. The use of biofuels in shipping – as well as in vehicles and aviation – is being governed by what national governments are mandating. Therefore, future growth is very much tied to these regulations, which include:

Regulation What it does Why it matters for biofuels Commercial Impact

IMO (global framework)

 

Sets long-term decarbonisation targets for international shipping

Signals future need for low carbon fuels, including biofuels

 

Drives long-term investment decisions and fuel strategy

EU ETS

 

Puts a price on CO₂ emissions from shipping

Makes fossil fuels more expensive relative to biofuels

 

Encourages fuel switching and increases operating costs for conventional fuels

FuelEU Maritime

 

Sets limits on the GHG intensity of marine fuels

Directly incentivises the use of biofuel blends to meet targets

 

Creates immediate demand for biofuels and influences bunker procurement strategies

There are also a number of port-level regulations, which may affect biofuels shipping. For example, the port of Singapore requires biofuels supplied in port to meet ISO 8217 standards.

 

Infrastructure and logistics impacts

 

Biofuels differ from traditional fossil fuels in several key ways, such as in terms of their stability, degradability and cold temperature performance, meaning they require different infrastructure and logistical handling to traditional fuels. These key differences in biofuels can cause challenges for the shipping industry, such as:

  • Specialised storage requirements
    The chemical properties of biofuels mean they can degrade over time, absorb water and react differently to traditional fossil fuels. As a result, the storage of biofuels is highly complex and calls for safety precautions to reduce fire risks or potential contamination.
  • Port capacity
    A port needs to be able to handle biofuels efficiently in order to keep shipping running efficiently.
  • Biofuel bunkering availability
    Currently, we are still seeing limited and inconsistent bunkering availability across global ports. Limited capacity at a specific port can cause delays for vessels waiting to bunker, or require ships to reroute, which in turn increases the voyage times and costs.
  • Logistical bottlenecks
    The production of biofuels hinges on a complex supply chain that incorporates feedstock production, processing and transportation. Any bottlenecks in this process can lead to higher prices, delays and unpredictable supply.

Despite these challenges, biofuels also represent significant opportunities for the maritime industry, including their ability to:

  • Be used as drop-in fuels without the need for major vessel modifications
  • Support compliance for operators
  • Help ships comply with emissions regulations and avoid penalties

 

Price pressures and forecasting

 

Financial planning for biofuels is complex due to three key variables – each of which is affected by both short-term and long-term forecasting and volatility drives:

  1. Supply and demand issues
    Supply and demand in the biofuels sector is particularly volatile as production depends on agriculture and demand is largely driven by government policy. These factors make it hard to predict fuel costs, which calls for the need for contingency budgets.
  2. Fuel pricing
    The price of biofuels can fluctuate quickly due to changes in crop yields, changes in regulation (i.e. the introduction or removal of subsidies and/or credits), demand from competing sectors like aviation and road. As a result, biofuels are associated with higher operating costs, which call for well-considered hedging strategies.
  3. Freight rates
    Given that biofuel trade is still developing, routes are less stable and volumes can fluctuate. This makes it difficult to estimate transport costs, resulting in increased exposure to spot market volatility.

 

Summary and further resources

 

We are seeing growing biofuel shipping volumes and tightening chemical tanker availability, it is essential that biofuels producers and customers take a strategic approach. Clarksons’ Specialised Products team has extensive experience in advising biofuel producers and traders on how to navigate the landscape, including:

 

Get in touch if you would like to set up a conversation to find out more.