The global used cooking oil (UCO) market is undergoing fundamental shifts due to new U.S. regulations, Asian trade restrictions, and evolving European demand patterns. These disruptions are set to reshape biodiesel and sustainable aviation fuel (SAF) production, forcing traders and refiners to adapt to a rapidly changing landscape.Key Developments Impacting UCO Markets:
- The U.S. 45Z Tax Credit (effective 2025) excludes imported UCO-based biodiesel, weakening U.S. demand for Chinese UCO.
- China canceled its 13% UCO export tax rebate, signaling a shift toward domestic biofuel expansion.
- Indonesia imposed UCO export restrictions to secure feedstock for its B40 biodiesel program, tightening regional supply.
- Malaysia is capitalizing on trade shifts, increasing UCO exports and launching a futures market to attract buyers.
- The European Union remains the largest buyer, but is facing rising costs and logistical constraints.
Global UCO Supply & Demand Overview
Supply Side Developments
Country | Key Policy/Development | Impact on Global Supply |
|---|
US | 45Z Tax Credit removes incentives for imported UCO. | Reduces U.S. demand for Chinese UCO, increasing global availability. |
China | Canceled 13% UCO export tax rebate. | May reduce exports, prioritizing domestic biodiesel and SAF production. |
Indonesia | Restricted UCO exports to meet B40 biodiesel mandate. | Limits global supply, pushing prices higher. |
Malaysia | Expanding UCO exports, launching FOB Straits futures contract. | Becoming a key global supplier, absorbing demand from U.S. and EU buyers. |
- China’s UCO exports remain available but could tighten in H2 2025 if domestic demand grows.
- Indonesia’s restrictions are reducing availability, forcing refiners to seek alternatives.
- Malaysia is emerging as the key supplier, offering stable supply and transparent pricing mechanisms.
Demand Side Dynamics
Region | Primary Demand Drivers | Market Impact |
|---|
European Union | Increasing demand for UCO-based biodiesel & SAF mandates. | Rising prices due to tightening global supply. |
United States | Shift to domestic feedstocks (soybean oil). | Reduced demand for imported UCO, lowering Asian export volumes. |
China | Expanding domestic biofuel and SAF industry. | Likely to reduce UCO exports over time. |
Southeast Asia | Growing biodiesel production (B40 in Indonesia, B20 in Malaysia). | Increasing regional UCO demand, pressuring global supply. |
- Europe remains the largest UCO buyer, facing rising costs and potential supply shortages.
- U.S. refiners are moving towards alternative feedstocks, shifting global trade flows.
- China and Southeast Asia are absorbing more UCO domestically, limiting export availability.
UCO Market Pricing & Trade Analysis
Current Price Matrix (February 21, 2025)
| UCO Origin | Primary Buyers | FOB Price USD/MT | Market Trend |
|---|
| China | EU, Singapore | 1,020 - 1,050 | Declining due to reduced U.S. demand but may tighten later in 2025. |
| Indonesia | China, EU | 1,100 - 1,140 | Increasing as export restrictions reduce availability. |
| Malaysia | U.S., EU | 1,080 - 1,120 | Rising as Malaysia absorbs demand from Indonesia and China. |
| Argentina (Biodiesel Feedstock) | EU | 1,045 | Stable, supported by EU blending mandates. |
| Netherlands (SAF Feedstock) | U.K., Germany | 1,300 | Increasing due to SAF expansion. |
- China’s UCO remains relatively cheap but could tighten as export reductions take effect.
- Malaysia is becoming the preferred supplier, with rising demand pushing prices higher.
- SAF feedstock prices are increasing globally, driven by mandates and competition for waste oils.
Strategic Market Opportunities & Trade Recommendations
Arbitrage Opportunities for UCO Buyers
- European refiners should secure Chinese UCO while it remains available at competitive prices.
- Malaysia offers a strong alternative for U.S. and EU buyers, ensuring supply security.
- SAF production in Europe and China is expanding, increasing competition for waste-based feedstocks.
- Biodiesel refiners should establish long-term UCO contracts before further supply constraints emerge.
- Alternative waste feedstocks (animal fats, synthetic biofuels) should be considered to hedge against UCO shortages.
- Traders should hedge against price volatility by using Malaysia’s new FOB Straits futures contracts.
GrainFuel Nexus® Recommendations
Short-term Leverage arbitrage opportunities in China before trade restrictions evolve.
Mid-term Shift sourcing strategies toward Malaysia, locking in long-term contracts.
Long-term Invest in alternative feedstocks & refining efficiencies to mitigate cost volatility.
For European Refiners & Buyers
- Lock in UCO contracts with Chinese suppliers while export flows remain strong.
- Diversify sourcing strategies by engaging Malaysian exporters for long-term supply security
For U.S. Biodiesel Producers
- Reassess supply chains to secure alternative feedstocks (soybean oil, animal fats) in response to 45Z Tax Credit changes.
- Explore Malaysian UCO to supplement domestic sources, leveraging price transparency from the futures market.
For SAF Producers & Investors:
- Secure waste-based feedstocks early to mitigate rising costs in the SAF sector.
- Monitor regulatory shifts in Asia and the EU, as policy-driven demand for SAF will continue impacting UCO availability.
GrainFuel Nexus® will continue to provide real-time updates as new trends emerge.
GrainFuel Nexus® | Expert Commodity Intelligence & Strategic Advisory
www.grainfuel-nexus.com
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