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The cost of producing sustainable aviation fuel (SAF) in Europe soared to unprecedented levels by the end of the first half of the year, driven by tightening waste-based feedstock markets, volatile energy prices, and increasing doubts regarding Europe’s capacity to achieve its SAF ambitions, sources told Fastmarkets. Market participants noted that H1 also marked a significant shift in industry thinking, with attention moving beyond headline mandate targets to the practical challenges of scaling commercial production.
Fastmarkets’ assessment for sustainable aviation fuel (SAF max), base cost, exw Netherlands, stood at $2,036 per tonne on January 2. This assessment saw a decline through much of the first quarter before steadily climbing from April, reaching $2,181 per tonne by July 10 – the highest level since Fastmarkets launched this assessment in June 2025. Similarly, the assessment for sustainable aviation fuel (HVO max), base cost, exw Netherlands, followed a comparable trajectory, rising from $2,080 per tonne at the start of the year to $2,294 per tonne on July 10 – also its highest point since inception.
Feedstocks emerged as the dominant driver of SAF production economics throughout the first half of the year. Used cooking oil (UCO), identified as the single largest cost component in the hydroprocessed esters and fatty acids (HEFA) pathway, consistently dictated the direction of Fastmarkets’ cost-of-production assessments. Beyond feedstocks, hydrogen costs, renewable diesel values, and co-product prices also influenced weekly market movements.
UCO prices, ISCC, ddp Northwest Europe, began the year at €1,090 ($1,243) per tonne before a steady decline to €1,025 per tonne in early March. This dip pushed both cost-of-production assessments to their lowest levels of 2026, with the SAF max assessment falling to $1,902 per tonne on March 13 and HVO max reaching $1,922 per tonne.
The trend reversed sharply in the second quarter. UCO prices climbed almost every week from April, culminating at €1,198 per tonne on July 10, the highest level since February 2025. This sustained rally in feedstock prices more than offset mixed movements in the hydrogen, carbon, and co-product markets, ultimately propelling both SAF cost assessments to record highs.
Hydrogen, while less influential than feedstocks, regularly amplified or softened weekly movements, largely tracking front-month Dutch Title Transfer Facility (TTF) natural gas futures. Prices surged from €2.30 per kilogram at the start of the year to €3.69 per kg on March 20, following the escalation of the Middle East conflict, which sent natural gas prices sharply higher. Hydrogen then weakened through the second quarter, tempering the feedstock-led uptrend in SAF production costs, before resuming its climb from June to reach €3.23 per kg by July 10, with the strength of the natural gas market once again contributing to elevated SAF production costs.
Bio-naphtha and bio-propane values strengthened during several periods in H1, improving producer economics by boosting the value recovered from the refining process. However, weaker co-product markets during parts of February, May, and June diminished these offsets and contributed to higher production costs. Renewable diesel values also played a role in SAF economics, as HVO remains a principal co-product of the HEFA process, directly influencing the value producers recover from their overall product slate.
HVO prices softened over the period, weighed down by weaker fossil diesel markets and subdued physical demand. This weakness repeatedly offset some of the upward pressure from rising UCO prices, thereby limiting the magnitude of increases in SAF production costs. Fastmarkets emphasized that understanding both feedstock market dynamics and the broader energy transition landscape is critical for developing effective procurement strategies, managing risks, and maximizing profits. Their SAF price assessments aim to provide airlines, aviation industry traders, and finance managers with essential clarity.
Physical SAF spot prices followed a more volatile trajectory than production costs. While receding from their March spike caused by the Middle East conflict, they remained 14% higher than at the start of the year. Spot SAF indications began the year on a strong downtrend, falling from approximately $2,280 per tonne to $2,050 per tonne in just a few weeks in January due to weak demand.
The market then surged in March following the escalation of the Middle East conflict. Rising conventional jet fuel prices, coupled with concerns over potential fuel supply disruptions, pushed spot SAF indications as high as $3,500 per tonne during the week to March 20, despite limited physical trading activity. These gains proved short-lived, however. As 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 – a decline from the March peak but still 14% above the year’s start. Sources informed Fastmarkets that weaker jet fuel prices, limited spot transactions, and thin liquidity collectively contributed to lower physical indications, even as production costs climbed.
Throughout much of the period, market participants closely observed the relationship between HVO and SAF, given that both fuels compete for the same pool of waste-based feedstocks. During June and July, the two frequently traded at near parity – an unusually narrow spread considering SAF’s higher production costs and compliance value.
While the market maintained comfortable supply levels in the first half, industry attention has increasingly shifted beyond immediate compliance obligations. Provisional government data from the UK indicates that SAF blending in H1 comfortably surpassed the country’s 2% mandate, and market participants have consistently informed Fastmarkets that Europe currently possesses sufficient HEFA-based SAF to meet existing blending requirements.
Consequently, focus has pivoted towards the latter half of the decade. Growing concerns over future feedstock availability have spurred increased discussions about alternative production pathways, including alcohol-to-jet (AtJ), methanol-to-jet (MtJ), and synthetic SAF (eSAF). This comes as policymakers prepare for higher blending mandates and dedicated power-to-liquid requirements. Market participants also continued to monitor policy developments across the UK and Europe, including the UK’s call for evidence on future SAF availability and ongoing discussions concerning the long-term implementation of ReFuelEU Aviation requirements.
Concurrently, 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. Ebikade explained, 'For several years, the conversation centered on mandates, targets, and percentages of jet-fuel replacement. 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 identified 'the most immediate challenge is feedstock.' He elaborated, '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 concluded that while policy remains the primary driver of today’s SAF market, commercial fundamentals are becoming increasingly vital as the industry moves towards 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.' Source: Fastmarkets