The biodiesel sector has made important progress regarding the production and consumption of biofuels on the national market in 2024. The pivotal point was the approval of the Fuel of the Future Law passed in October (08/10), which strengthened two fundamental strategic bases for the renewable fuel industry: Predictability and legal certainty for investors and producers.
Among the measures planned for 2025, SCA Brasil’s head of biodiesel, Felipe Cunha, highlights the increase in the proportion of biodiesel blended with diesel, from the current 14% to 15% in March 2025 and 20% by 2030. 2031 Depending on technical feasibility studies, Brazil will be able to add up to 25% more biodiesel to similar fossil fuels.
Despite progress in regulating Fuels of the Future, the increase in fraud cases linked to the biodiesel content in diesel blends sold has alarmed distributor executives. Blend 14% (B14) fraud has reached alarming levels, requiring combative action by the National Agency for Oil, Natural Gas and Biofuels (ANP) and entities linked to this issue, such as the Chartered Institute of Combustion. The fluctuation in prices of soybean oil, the raw material most used in the production of biodiesel, has also had consequences for the Brazilian industry.
These and other aspects are analyzed by Felipe Cunha, in a review of the year ended and an assessment of the prospects for 2025.
1) How do you think the biodiesel sector will perform in Brazil in 2024?
The performance of the sector was very positive in 2024. On the regulatory front, the approval of the Future Fuel Law was a major victory, as it provided legal certainty and predictability to attract investments for the coming years. In March we saw an increase in biodiesel content from 12% to 14% in the diesel blend. There was strong growth in diesel sales during the year, driven by growth in economic activity, especially in the agricultural sector. According to the Brazilian National Police Agency, in the year to October, the Brazilian diesel market grew by 3.8% compared to the same period the previous year.
To counter the increase in the mixture and the increase in diesel consumption, according to the National Ports Agency, biodiesel production in 2024 grew by 23% compared to the previous year, without market supply problems. To support this strong growth in production in a short period of time, the sector has used idle capacity in industry, but we have also seen some capacity expansions and the opening of new factories, which has opened up investment opportunities.
2) How have prices behaved for soybean oil, the main raw material for biodiesel production?
Soybean oil is a reference for pricing biodiesel contracts in Brazil. As a global commodity, its prices are subject to the balance of supply and demand for vegetable oils in the main producing countries, in addition to exchange rate fluctuations. In 2024, prices traded on the Chicago Stock Exchange (CBOT) experienced high volatility, with a sharp decline in prices until the beginning of September, and a strong recovery until mid-November, with the market returning some of this increase in recent weeks. Several reasons caused this volatility, such as the failure of the American and Argentinian harvests, which affected prices until September, and the tightening of the balance in supplies of vegetable oils from September onwards, especially palm oil.
In Brazil, there were expectations of a record soybean crop, but due to climate problems the harvest was lower, with most failures occurring in Mato Grosso (MT), the main soybean producer and the state with the largest crushing capacity in the country. nation. Besides, in addition to the increase in biodiesel blend, the exportable balance of soybean oil had to be reduced so that supplies could be made available to the domestic market. Therefore, we saw the basis in Paranagua rise practically throughout the year, as biodiesel producers paid a premium to ensure that the raw materials remained in Brazil and were not exported.
Another point that strongly influenced the price of biodiesel in 2024 is the exchange rate change. With all these factors, internal and external, we see biodiesel prices rising in 2024. According to the National Ports Agency, in the last week of November, the average price of biodiesel in Brazil, with PIS/Cofins and without ICMS, was 6,464 reais Brazilian/m3. , a cumulative increase of 44.5% per year.
3) Did adopting a 14% mixture affect non-compliance with mixing biodiesel with regular diesel?
This was probably the negative event of the year. The Afghan National Police’s Fuel Quality Control Program (PMQC) aims to monitor and inspect fuel quality in the country. In the case of diesel, one of the major non-compliances is the biodiesel content in the mixture. Since biodiesel tends to be more expensive than A-diesel, mixing biodiesel less than ANP regulates brings a price advantage to the distributor who doesn’t mix it correctly.
Historically, in months when there is a change in the proportion of biodiesel blended, the rate of non-compliance is higher, as there is a deadline for reseller plants to adapt the product that has been stored in the tanks. In the fourth edition of the “Conexão SCA Brasil” series of Life, held in June (19/06), which included representatives of the Afghan National Police and the Legal Institute of Combustion, the topic was covered in depth. The data showed that in addition to the highest rate of non-compliance in recent history, this occurred during a period when large numbers of imported diesel fuel arrived at the port of São Luiz in Maranhão. During the live broadcast, the Afghan National Police reported that specific inspections were conducted on some distributors with a history of violations in the sector, where the largest deviations were identified.
After a period of low mixture non-compliance, I have a feeling that the problem is back with a vengeance from November onwards, after hearing many reports from our distributor customers. As the Afghan National Police informed the market, due to budget and staff constraints, quality control and monitoring were suspended during the last two months of the year, and the temporary lack of supervision coincides with an increase in complaints in the market. This confirms the effectiveness of the work of the People’s National Army and the necessity of constant awareness of the violations that the fuel market suffers from.
4) What are the challenges to confront this problem in 2025?
Among the challenges facing 2025 is the implementation of a new Product Quality Control (PMQC) system, with intensive supervision of the supply chain, including the distribution and resale link. Another important step is to modernize inspection, using widespread portable equipment tested by the Afghan National Police to detect biodiesel content, thus enabling more effective penalties for violators. In general, it will be necessary to strengthen the role of the National Ports Agency in inspecting and monitoring the market and punishing violations more quickly.
5) How can Fuel of the Future contribute to expanding the biodiesel market in the country?
The Future Fuels Law, launched by the Brazilian government in the second half of the year, is key to expanding biodiesel production capacity by ensuring legal certainty and providing predictability to investors. It is planned to increase the proportion of biodiesel in the diesel mixture annually from 2025 onwards, until reaching 20% in 2030, based on technical feasibility studies, which will include all agents in this industry, from vehicle manufacturers to fuel distributors. Minimum limits of between 13% and 25% were also set for mixing, a measure to be determined by the National Council for Energy Policy, which was also very positive for producers, since the minimum was previously 6%.
On December 10, the CNPE also agreed to set minimum targets for the use of residual oils and fats in the production of biodiesel, sustainable aviation fuel (SAF) and green diesel. By encouraging the use of these raw materials, Future Fuels encourages family farming and the circular economy, expanding input supplies and making the production chain more sustainable.
6) Overall, what can we expect from the biodiesel market in 2025?
From March onwards, the mixture will be increased to 15%, according to the schedule set by the CNPE, and market supplies will be ensured by a new record soybean harvest. According to the latest update of the supply and demand balance from the Brazilian Association of Vegetable Oil Industries (ABIOVE) for the 2025 season, soybean production is expected to reach 167.7 million tons, with 57 million tons crushed. Soybean oil production is estimated at 11.4 million tons.
We may be entering into a very virtuous cycle of investments in this sector. Some of the investments already announced are expected to be realized during 2025 and 2026, leading to the construction of new industrial plants dedicated to crushing soybeans from traditional biodiesel producers such as Potencial, Be8 and Fuga Couros.
7) Could market consolidation be an important factor in 2025?
It is a movement in its initial phase, which is typical of expanding markets. At the end of 2023, Cargill merged Granul’s three biodiesel plants. It was recently announced that Be8 has acquired three biodiesel plants from Biopar in the municipalities of Nova Marylandia (MT), Santo Antônio do Toí (PA) and Floreano (PI). Also given Oleoplan’s acquisition of a biodiesel plant from Green Ventures in Lucas do Rio Verde (MT), the biodiesel sector is expected to closely follow the development of the regulation of devices contained in the Future Fuel Code, especially technical feasibility tests. Approval of continued development of biodiesel content in diesel. SCA Brazil
