China's Dec UCO price falls to more than 2-year low on demand slump, EU probe

China's used cooking oil price in December fell to more than a two-year low since March 2021 as lackluster demand from Europe and an ongoing probe into Chinese imports to the EU dented sentiment, trade sources said.

The Platts-assessed China UCO declined by more than 50% this month from an 18-month high of $1,627/mt FOB China seen in June 2022 to $791/mt FOB China, S&P Global Commodity Insights data showed. Platts first began assessing FOB China UCO in January 2021.

The last time Platts assessed FOB China UCO lower was at $736.77/mt during the COVID-19 pandemic in early March 2021, with no restaurant dining and limited global travel.

Further adding to the downturn in UCO prices this year was the weakness in Europe's biodiesel market in March as sources in Europe cited a bearish diesel market, poor spot demand, and feedstock oversupply.

"It doesn't help UCO suppliers that European winter is slowing demand in a big way," a trader said.

Winter in the northern hemisphere is traditionally low season for waste-derived material as UCO, made mainly from palm oil, due to its high cold filter plugging point, which is slightly risky during winter as it can be delivered solid if not heated properly.

The seasonal low demand was further exacerbated by the EU's ongoing probe into Chinese biodiesel exports due to allegations of possible fraud, industry sources told S&P Global.

Europe's imported UCO mainly comes from China but since the European Commission launched investigations into Chinese imports, the volume has dropped.

"They (the European buyers) have been avoiding Chinese UCO since the investigations began. And possibly sourcing from other UCO supplies ... Malaysia is one of them," another trader said. UCO exports from China to Europe declined by more than 50% year on year in the third quarter, according to trade sources, after the EU purchased around 728,200 mt in the third quarter of 2022.

Noticeably, Malaysia's UCO exports have been surging in the fourth quarter, where shipments to the EU jumped 43% from October to 58,465 mt, according to cargo surveyor Intertek Testing Services.

Some Chinese UCO volumes, however, shifted this year to fulfill growing US biodiesel demand, especially from producers of hydrotreated vegetable, market sources in Asia said.

Platts last assessed standard UCO cargo loading from China at $795/mt Dec. 8, unchanged on the week, but down $5/mt month on month, S&P Global data showed.