INTERVIEW: Policy confusion, SAF demand reshape Asian used cooking oil trade, prices

US biofuel makers are shifting from importing used cooking oil to animal tallow, but confusion over local policies and sustainable aviation fuel demand is supporting Asian UCO prices, Zeng Shu Fei, CEO of Singapore-based UCO collector KH Marque, told Platts on Feb. 24.

"There is a big shift as US [biofuel] producers have bought close to 1 million mt of animal tallow and greases between December and January, as they can receive producer tax credits for that," Shu Fei said on Feb. 22.

UCO has become a growing staple in US feedstock supplies, making the US the largest buyer ahead of the EU and Singapore since 2023.

However, in January, the US Treasury excluded imported UCO from qualifying for credit generation, aligning with market expectations and the demands of domestic lobby groups.

Shu Fei told Platts that there is still robust demand for UCO from SAF producers in the EU, UK, Singapore, and even Asia itself.

SAF producers are under pressure to meet current and upcoming blending mandates. The EU has a 2% mandate starting this year, while Singapore requires a 1% blend from next year. Japan and the UK have higher targets but with longer deadlines. We are seeing a lot of demand from there, Shu Fei said.

Unlike SAF makers, producers of maritime biofuels are not purchasing UCO, Shu Fei noted, adding that some shipping companies prefer finished products [bio bunkering fuels] and are hesitant about UCO due to quality concerns.

Asian interest pickup

In Asia, soft blending targets and government pilots are boosting demand for UCO. While China has enough UCO to meet the needs of the SAF plants being established there, Shu Fei said South Korea is also showing increased interest.

China's used cooking oil exports reached a record high of 2.951 million mt in 2024, up 43.49% from 2023, amid rising imports from the US, EU, and Singapore, according to the latest data from S&P Global Market Intelligence's Global Trade Atlas(opens in a new tab).

On Dec. 1, 2024, China eliminated the 13% export tax rebate on its UCO exports.

Shu Fei said protectionist measures in Indonesia and Malaysia, both traditional UCO exporters, may complicate trade in 2025.

On Jan. 8, Indonesia, the largest supplier of palm oil in the world, announced it would restrict exports of Palm Oil Mill Effluent and UCO as the government seeks to retain sufficient feedstock to achieve its new 40% biodiesel blending mandate.

Currently, in Malaysia, UCO exports are classified under sludge palm oil, and the government is reclassifying these definitions. Shu Fei said there are rumors that the government could ban UCO exports, adding that to mitigate policy risk within Asia, KH Marque plans to start collecting UCO in Thailand and Singapore as well.

Scaling UCO supply

Regarding the establishment of UCO collection supply chains, Shu Fei emphasized that traceability and certification are non-negotiable in the current market.

However, the bigger hurdle to scaling is acquiring the oil itself and securing financing.

Due to global demand, small vendors and new competitors are emerging daily, driving up collection costs, but this is not sustainable in the long run. Additionally, financing poses a significant challenge for larger operations, Shu Fei said.

"When you buy used cooking oil from restaurants and industries, you have to pay them immediately. But for us, from the restaurant to the warehouse to the buyer, there's probably a 60-day turnaround. So, if you are doing a large collection, it becomes very heavy on financing," Shu Fei said.

Platts, a part of S&P Global Commodity Insights, assessed the price of UCO FOB Straits at $1,050/mt Feb. 24, up 4% since the start of the year, while UCO FOB North Asia was up 3% year-to-date to $1,025/mt.