The Biodiesel market witnessed a notable upward trend in the latter half of March 2025 due to low supply in the market. The supply challenges were caused by a pause in production activities to limit the losses faced by the manufacturers. The producers have continued to face losses amid uncertainty over U.S. President Donald Trump’s approach to green fuel subsidies and the potential of a worsening trade war.

According to producers, the new US tariffs are driving up the cost of imported feedstock, rendering it expensive.  Producers of biofuel are under additional pressure because of the uncertainty brought on by the unpredictability of Biden-era assistance programs like the tax credit system.  Furthermore, the current shortage of clean fuel has been made worse by Trump's administration's failure to clarify clean fuel tax credits.

US producers have halted operations for Q1 2025 during the transition to the 45Z due to a difficult margin environment and low profit circumstances. This has resulted in a decreasing supply of biodiesel and limited the producers' losses.  The domestic market's overall lack of biodiesel supplies caused market pressure to rise. Additionally, the supply from exporting countries like Germany remained average amid the ongoing uncertainty due to tariffs.

On the other hand, the demand for biodiesel in the domestic market witnessed a slight rise due to increased consumption of distillate fuels like diesel in the market. Distillate fuel inventories declined by 6% as reported by EIA in the third week of March. In order to maintain a steady fuel supply in the market, the transportation sector's blending need for biodiesel increased as stockpile levels decreased.  In line with positive demand trends, diesel prices also rose.  Despite rising gasoline sector usage, the demand for biodiesel in the USA market was generally on the rise.

Moving further, the biodiesel market is continuously under pressure amid the uncertainty due to policy changes and demand dynamics in the market. The biodiesel market is expected to remain bullish if demand continues to increase. Production cuts and demand rise may continue to put upward pressure in the market until supply dynamics improve and production rebounds in the market. Increasing feedstock costs may further support the bullish trend in the coming weeks.

As per ChemAnalyst’s database, the overall market sentiments are expected to remain bullish in the short term as the industry continues to struggle with receding profit margins causing declining production activities.