China pivots to Europe for used cooking oil exports as tariffs hit shipments to US

By Chen Aizhu and Trixie Yap

SINGAPORE (Reuters) -China's used cooking oil (UCO) exports to the United States, its largest buyer, are set to plunge in coming months due to steep tariffs, forcing sellers to divert shipments to Europe and elsewhere, industry players said.

With Trump administration is now charging 125% import tariff on Chinese UCO from this month. Shipments to the U.S., valued at $1.1 billion last year, are tumbling with the last cargoes sailing around late March and early April before trade grinds to a halt, said three China-based UCO traders.

China's UCO exports hit an all-time high last year at nearly 3 million metric tons or worth $2.64 billion, according to Chinese customs.

"For the time being, arbitrage to the U.S. is closed and we think it will remain so for the medium term," said Richard Dickinson, Shanghai-based head of trading Amarus Trading, one of the largest dealers of Chinese UCO.

"Some of the exports will be diverted to Europe and new markets in Asia such as Korea, Thailand, Malaysia and India."

At least four new Sustainable Aviation Fuel facilities, which use UCO as an ingredient and totalling at least 700,000 metric tons per year of production capacity, have started up or will begin operation by this year in Thailand, Malaysia and Japan, according to industry insiders.

Exports to the U.S. have fallen since last December as Beijing removed tax rebates for UCO exports and also due to the new U.S. clean fuel tax policy that discourages the use of imported UCO, and the latest tariffs only exacerbates the situation, a shipper of the fuel said.

The European Union, which mandated a 2% SAF use this year, is likely to become the top destination for at least half of China's UCO shipments in the coming months, the traders said.

CHINA DEMAND UP

Chinese UCO exports is expected to fall this year as demand from its nascent SAF sector rises, traders and biofuel industry officials.

Dickinson and another Beijing-based senior biofuel trader estimated China's UCO exports to ease to 150,000 to 200,000 tons each month from April onward, 20-40% below the average monthly shipments in 2024.

The other sources declined to be named as they are not authorised to speak to the media.

New SAF plants such as Zhejiang Jiaao Enprotech launched late 2024 and several other plants starting or slated for start-up in the coming few months - owned by Haixin Energy Technology, Haike Chemical in Shandong and Blue Whale Bioenergy in Zhejiang - are set to become new UCO users, according to industry sources familiar with these plants.

   Chinese SAF producers are using 100,000 to 120,000 tons of UCO a month currently, a volume set to climb as new plants begin operations, according to industry estimates.

China began a pilot scheme last September of SAF use at four domestic airports in Beijing, Chengdu, Zhengzhou and Ningbo.

(Reporting by Chen Aizhu and Trixie Yap; Editing by Michael Perry)