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The outlook for the European animal fat market in the second half of 2026 is clouded by uncertainty, largely driven by shifting US tariff policies on Brazilian material. In July, the price for category 3 bone fat (5% FFA, 98%) exceeded €1,100 per tonne DDP North-West Europe. Similarly, category 3 mixed animal fat (15% FFA, 97%) followed a comparable trajectory, reaching a high of €1,050 per tonne DDP in late June, a level last observed in March 2023.
Despite a brief dip in June, sustained demand for European fats from both local purchasers and exporters propelled prices higher throughout the second quarter.
Some European market participants have adopted a bullish perspective for H2 2026, pointing to the cumulative tariff rate of 37.5% on Brazilian material shipped to the US, which was implemented on July 24. They anticipate this will redirect trade flows towards European buyers.
'European animal fat prices jumped a lot in Q2, supported mainly by US demand, but after energy and feedstock price corrections in the US, importers reduced their bids quite a lot,' a European feedstock producer told Fastmarkets. 'We hope they return to the levels we sold at before the drop.'
US tariff policy on imported feedstock has fluctuated repeatedly over the past 12 months. After the government imposed a 15% tariff on European goods and a 50% tariff on Brazilian goods in August 2025, the Brazilian rate was cut to 10% in February 2026. This was subsequently rebuilt through a 25% tariff and a further 12.5% in July. Additionally, uncertainty surrounding a proposed 50% reduction in RIN generation for fuel made from imported feedstocks, following a June 2025 proposal, constrained US import appetite during the first quarter of 2026.
These factors have resulted in heightened uncertainty across global animal fat markets and growing concern over shifting trade flows, according to sources.
Brazil is particularly vulnerable, with approximately 98% of its animal fat exports traditionally destined for the US, as per official customs data. From January to July, Brazil shipped 157,047 tonnes of beef tallow to the US and 29,062 tonnes to Europe, where the Netherlands was the leading destination at 15,998 tonnes.
The combination of higher tariffs and Brazil's limited export outlets places it at a competitive disadvantage compared to the EU, which benefits from lower import tariffs. This dynamic is viewed by sources as bullish for European prices. Nevertheless, some Brazilian cargoes continue to reach the US, and this trend is expected to persist in the short term, given Brazil's established position as a major tallow-producing country and the ongoing need for imported feedstocks to meet the robust 2026 production mandate outlined in the Renewable Fuel Standard.
Sources reported at least 30,000 tonnes of Brazilian tallow sold for September shipment to the US at around $1,150-1,180 per tonne FOB Santos. By comparison, recent European deals were heard at $1,250-1,300 per tonne FOB ARA for August-September loading. As of August 6, US domestic origin max 20% FFA tallow traded at $1,665 per tonne delivered US Gulf.
'We know some cargoes were sold for nearby loading, but European supplies cannot fully satisfy US demand,' a European trader stated. 'We only have a few exporters here approved for exports to the US, and some shippers simply do not have enough capacity to build big cargoes for US buyers.' Limited port storage, alongside US EPA approval and certification requirements, continues to constrain European exports to the US.
Despite recent export-driven support, several participants expressed caution regarding the medium-term outlook. Some held a bearish view for the third and fourth quarters, citing increasing Brazilian inflows into the EU, seasonally higher European slaughter rates, softer spot demand from the animal feed, pet food, and oleochemical sectors, and planned maintenance shutdowns at some biofuel plants.
'Sadly, for local producers, there seem to be more bearish than bullish factors in the near future. As Neste closes for planned maintenance, other producers might do too,' a European trader commented. Neste is scheduled to conduct a planned turnaround at its Porvoo refinery in Finland between August and October, with maintenance at its Rotterdam refinery slated for the fourth quarter.
Sources also reported weaker trading activity in the tallow-based Hydrotreated Vegetable Oil (HVO) market compared to the UCO-based HVO market, even as Used Cooking Oil (UCO) continues to trade at a premium to animal fat. The weekly price for Category 3 bone fat (5% FFA, 98%) was €1,090 per tonne DDP North-West Europe on August 6, while the daily UCO (ISCC) DDP North-West Europe price stood at €1,220 per tonne on August 7.
Nevertheless, some participants still pointed to elevated vegetable oil prices and geopolitical uncertainty as potential sources of support. 'The only potential light at the end of the tunnel for animal fats is volatile vegoil futures and general market uncertainty caused by the Ukraine-Russia war, and the resulting high UCO and vegoil prices in Europe, which make animal fat more attractive as a feedstock for all industries, not just biofuels,' a source noted.
Participants therefore remain divided on the second-half outlook: high vegetable oil prices offer support, while rising supply and weaker biofuel demand threaten to cap further gains. Source: Fastmarkets