Export prices for UCO increased by $100/t after China’s announcement of the abolition of benefits

China’s decision to abolish tax incentives for the export of used vegetable oil will reduce supplies, which will increase the cost of raw materials for biofuel producers around the world, and in the long run will improve the competitiveness of Chinese biofuels based on UCO.

On November 15, the Ministry of Finance of China announced the abolition of the 13% export duty exemption on chemically modified animal, vegetable or microbiological oils and fats starting December 1, which shocked the markets.

China is the world’s largest exporter of used vegetable oil and biodiesel produced from it. In 2023, the US became the main buyer of such oil, and the EU was the buyer of UCO biodiesel.

According to S&P Global Commodity Insights, from November 19 to November 21, the price of used UCO oil in North Asia increased by $100/t to $1,000/t, while the price of UCO on FOB Straits terms set by Platts during this period increased from $905/t to $950/t. At the same time, in China, spot prices for UCO oil fell from 930 $/t to 841 $/t from November 15 to 21.

Experts of Rossari Biotech Ltd believe that the abolition of the privilege will increase the export value of UCO by 103 $/t, which will reduce the volume of its exports from China, which were growing rapidly. Increasing domestic supply amid rising prices for raw materials for foreign competitors will increase the competitiveness of Chinese biofuels based on UCO. Some Chinese UCO exporters have already violated the terms of supply, so buyers have started looking for other sources to purchase raw materials and have already increased demand for Malaysian UCO. However, in the long run, Trump’s actions as President of the United States may have a greater impact on Chinese UCO prices than the abolition of export privileges.

Analysts believe that the reason for the change in the tax regime is China’s intention to pay more attention to the biofuel industry. In August, a policy goal was announced to introduce a 2% share of environmentally friendly aviation fuel in the SAF blend by 2025 and increase it to 15% by 2030. To meet the 2% SAF mandate, China will need 2.5 million tons of SAF, which requires more than 3 million tons of UCO as raw materials.

According to customs data, in 9 months of 2024, China exported 2.12 million tons of UCO, which exceeds the 1.406 million tons exported in all of 2023. It also plans to introduce the first export quota for marine bunker fuel blended with biodiesel B24 in 2025 to support biofuel producers affected by the EU’s anti-dumping tariffs earlier this year.

Tags: China, prices, edible oils