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The cost of producing sustainable aviation fuel (SAF) in Europe reached sky-high levels at the end of the first half of the year, driven higher by tightening waste-based feedstock markets, volatile energy prices and growing doubts over Europe’s ability to meet its SAF ambitions, sources told Fastmarkets.Market participants said the first half also marked a broader shift in industry thinking, with attention moving away from headline mandate targets toward the practical challenges of scaling commercial production.
Fastmarkets assessed the sustainable aviation fuel (SAF max), base cost, exw Netherlands at $2,036 per tonne on January 2. The assessment declined through much of the first quarter before climbing steadily from April, reaching $2,181 per tonne on July 10 – the highest level since Fastmarkets launched the assessment in June 2025.
And the assessment for sustainable aviation fuel (HVO max), base cost, exw Netherlands followed a similar trajectory, rising from $2,080 per tonne at the start of the year to $2,294 per tonne on July 10 – also the highest level since its launch.
Feedstocks were by far the largest driver of SAF production economics over the first half of the year and used cooking oil (UCO) – the single largest cost component in the hydroprocessed esters and fatty acids (HEFA) pathway – repeatedly dictated the direction of Fastmarkets’ cost-of-production assessments.
Feedstocks have consistently remained the largest driver of SAF production economics, with hydrogen costs, renewable diesel values and co-product prices also influencing weekly movements.
Used cooking oil, ISCC, ddp Northwest Europe started the year at €1,090 ($1,243) per tonne before falling steadily to €1,025 per tonne in early March, driving both cost-of-production assessments to their lowest levels of 2026. The sustainable aviation fuel (SAF max) assesment fell to $1,902 per tonne on March 13, while the sustainable aviation fuel (HVO max) reached $1,922 per tonne.
The trend reversed in the second quarter. UCO prices rose almost every week from April, reaching €1,198 per tonne on July 10, the highest level since February 2025. The sustained feedstock rally more than offset mixed moves in hydrogen, carbon and co-product markets and ultimately pushed both assessments to record highs.
Hydrogen had less influence than feedstocks but regularly amplified or softened weekly movements, broadly tracking front-month Dutch Title Transfer Facility (TTF) natural gas futures.
Prices jumped from €2.30 per kilogram at the start of the year to €3.69 per kg on March 20, after the escalation of the Middle East conflict, with the US and Israel pitted against Iran and Lebanon, sent natural gas prices sharply higher. Hydrogen then weakened through the second quarter, slowing the feedstock-led uptrend in SAF production costs, before climbing again from June to reach €3.23 per kg by July 10, with the strength of the natural gas market once again contributing to higher SAF production costs.
Bio-naphtha and bio-propane values strengthened during several periods in the first half of the year, improving producer economics by increasing the value recovered from the refining process. However, weaker co-product markets during parts of February, May and June reduced those offsets and contributed to higher production costs.
Renewable diesel values also fed into SAF economics because HVO remains one of the principal co-products of the HEFA process, directly influencing the value producers recover from the overall product slate.
HVO prices weakened over the period, weighed on by weaker fossil diesel markets and subdued physical demand. That weakness repeatedly offset part of the upward pressure created by rising UCO prices, limiting the scale of the increases in SAF production costs.
We recognize that understanding both feedstock market dynamics and the wider energy transition landscape is essential for developing effective procurement strategies, managing risks and maximizing profits. Fastmarkets’ SAF price assessments provide airlines, aviation industry traders and finance managers with the clarity they need.
Physical SAF prices followed a more volatile path than production costs, falling back from their spike in March caused by the Middle East conflict, but still up 14% from the start of the year.
Spot SAF indications began the year on a strong downtrend, falling from around $2,280 per tonne to $2,050 per tonne in just a few weeks in January on weak demand.
The market then surged in March following the escalation of the conflict in the Middle East. Rising conventional jet fuel prices, combined with concerns over potential fuel supply disruptions, pushed up spot SAF indications as high as $3,500 per tonne during the week to March 20, despite limited physical trading activity.
Those gains proved short-lived., however, and as the energy markets stabilized and conventional jet fuel prices retreated, spot SAF values eased through the second quarter to $2,500-2,700 per tonne by early July – down from the March peak but still 14% above the start of the year.
Sources told Fastmarkets that the weaker jet fuel prices, limited spot transactions and thin liquidity all contributed to lower physical indications even as production costs rose.
Throughout much of the period, market participants closely monitored the relationship between HVO and SAF because both fuels compete for the same pool of waste-based feedstocks. During June and July, the two frequently traded at close to parity – an unusually narrow spread given SAF’s higher production costs and compliance value.
While the market remained comfortably supplied during the first half, industry attention has increasingly shifted beyond current compliance obligations.
Provisional government data in the UK shows that SAF blending in the first half of the year comfortably exceeded the country’s 2% mandate, and market participants have consistently told Fastmarkets that Europe currently has sufficient HEFA-based SAF to meet existing blending requirements.
So attention has instead turned toward the second half of the decade. Growing concerns over future feedstock availability prompted an increase in discussions about alternative production pathways, including alcohol-to-jet (AtJ), methanol-to-jet (MtJ) and synthetic SAF (eSAF), as policymakers prepare for higher blending mandates and dedicated power-to-liquid requirements.
Market participants also continued to monitor policy developments in the UK and Europe, including the UK’s call for evidence on future SAF availability and ongoing discussions around long-term implementation of ReFuelEU Aviation requirements.
At the same time, questions surrounding future HEFA feedstock availability became increasingly central to industry discussions.
“The defining shift has been the move from an aspirational view of the industry toward a more pragmatic one,” sustainable aviation specialist Elvis Ebikade, told Fastmarkets.
“For several years, the conversation centered on mandates, targets and percentages of jet-fuel replacement,” Ebikade said. “That was a necessary starting point but the market is now asking the practical questions that will determine whether those ambitions can be delivered: can we produce cost-competitive supply at the required scale?; are the feedstock volumes available?; can customers absorb the cost?; and do the project economics support investment?”
For commercially established HEFA production, Ebikade said “the most immediate challenge is feedstock.”
“How much UCO, tallow and other eligible lipid feedstocks can be reliably aggregated? How quickly can the industry expand into additional sources such as intermediate and cover crops, pyrolysis-derived bio-oils, algal lipids and emerging routes that convert CO2 into oil-like intermediates?”
Ebikade said that while policy remains the primary driver of today’s SAF market, the commercial fundamentals are becoming increasingly important as the industry moves toward larger-scale deployment.
“The mandates have created demand, which was the necessary first step. The next question is whether the surrounding mechanisms also enable supply to quickly meet demand. The priority is closing the gap between demand requirements and [financially viable], cost-competitive supply as 2030 approaches,” he said.