Food & Climate
The shrinking biodiesel sales are boosting Chinese used cooking oil (UCO) exports and prices, which analysts predict are set to touch a new high this year, after European biodisel decision.
On Friday, August 15, the European Union imposed provisional duties on Chinese biodiesel after finding it is being sold in EU markets at unfairly low prices, according reports seen by “Food & Climate” platform.
The European Commission, which oversees EU trade policy, has proposed setting provisional tariffs of between 12.8 and 36.4%, hitting over 40 companies including leading producers in an export business that was worth $2.3 billion last year.
Exports to the bloc have fallen sharply since mid-2023 amid investigations. Volumes in the first six months of this year plunged 51% from a year earlier to 567,440 tons, Chinese customs data showed, according to “Reuters”.
June shipments shrank to just over 50,000 tons, the lowest since mid-2019, according to customs data.
At their peak, exports to the EU reached a record 1.8 million tons in 2023, representing 90% of all Chinese biodiesel exports that year. The Netherlands was the top importer in 2023, soaking in 84% of China’s biodiesel shipments to the EU, followed by Belgium and Spain, Chinese customs figures showed.
Soaps products
Many of China’s biodiesel producers are privately-run small plants employing scores of workers processing waste oil collected from millions of Chinese restaurants. Before the biodiesel export boom, they were making lower-value goods like soaps and processing leather products.
Anticipating the tariffs, traders stocked up on used cooking oil (UCO), lifting prices of the feedstock, while prices of biodiesel sank in view of shrinking demand for the Chinese supply.
“With hefty prices of UCO partly supported by strong U.S. and European demand, and free-falling product prices, companies are having a tough time surviving,” said Gary Shan, chief marketing officer of Henan Junheng.
With low prices, biodiesel plants have cut their operations to an all-time low of under 20% of existing capacity on average in July, down from a peak of 50% last seen in early 2023, according to some Chinese consultancies companies.
Meanwhile, shrinking biodiesel sales are boosting China’s UCO exports, which analysts predict are set to touch a new high this year. UCO exports soared by two-thirds year-on-year in the first half of 2024 to 1.41 million tons, with the United States, Singapore and the Netherlands the top destinations.
The Previous experiences also prove that Europe and Western countries do not boycott as long as they have a need for such a product, and China, with a population of 1.4 billion people, is the largest producer of used cooking oil.
World’s leading UCO producers
China, will soon run out of waste oil, as demand from Europe and the US outstrips supply, a new Transport & Environment (T&E) study showed in January.
Stratas Advisors’ research, on behalf of T&E, looks at the collection capacity of the world’s leading UCO producers and finds that China already exports more than half its UCO to be used in European and US cars and trucks.
That is before airlines are set to triple demand for UCO by 2030 to meet ‘sustainable’ aviation targets, according to “Transport enviroment”.
Europe burns through 130,000 barrels of used cooking oil a day – 8 times more than it collects. Following the introduction of Biden’s Inflation Reduction Act, the US now consumes 40,000 barrels a day.
To fill the gap, both are importing more and more UCO from China, as well as Indonesia and Malaysia. But as airlines start to get in on the act, demand is outstripping what can be sustainably collected.
Demand for UCO across the world is set to spike as targets for aviation fuels kick in. Ryanair alone would need all the UCO in Europe to run just 12.5% of its flights on UCO – its voluntary target for 2030. Global SAF targets in 2030 would require at least twice the UCO that can be collected in the US, Europe and China combined, the study fund. This means support used cooking oil demand from China.