IEW 2025: Asian UCO trade slows amid US tax, tariff uncertainties: Analyst

US biofuel producers are holding back from imports of used cooking oil on expectations that President Donald Trump will dial back Joe Biden-era green energy incentives, Nagaraj Meda, managing director of commodities risk firm TransGraph Consulting, said Feb. 12.

Since 2023, the US has become the largest buyer of UCO of Chinese origin, edging out the EU and Singapore after the Inflation Reduction Act linked tax credits on biofuels to their carbon intensity scores. This helped push the demand for UCO as a feedstock for refiners rather than first-generation feedstocks such as soybean and rapeseed oil.

However, with Trump looking to roll back some of the incentives announced by Biden in his final days in office, US biofuel makers are now in a wait-and-watch mode, Meda told S&P Global Commodity Insights on the sidelines of the India Energy Week 2025.

Small refinery exemptions were not easily granted under the Biden administration, but markets are now expecting the new leadership to ramp up SRE acceptance. This means that refiners do not have to blend as much biofuel as before, which would decrease their imports of Asian UCO, Meda said.

SREs give refiners temporary waivers from obligated biofuel blending targets provided by the US Environmental Protection Agency. In January 2025, the Trump administration asked the Supreme Court to pause the pending SRE lawsuit in court.

The outlook for UCO imports in 2025 and beyond is uncertain, with future trade flows dependent on new but currently unclear rules on US biofuel subsidies, S&P Global Commodity Insights said in a Biofuels Market Outlook report on Feb. 3.

Given current high feedstock prices, US importers are willing to wait for clarity on the issue of tax credits for biofuels made from imported feedstocks, according to Meda. He noted that market participants anticipate a complete repeal of the IRA, which would be bullish for soybean oil prices in the US.

Platts, a part of Commodity Insights, assessed UCO ex-mill North China at $941/mt Feb. 12, down 2% from the start of the year. Most buyers were waiting on the sidelines amid uncertainty after the US imposed tariffs on imported goods from China, sources said.

The US imported 2.27 million mt of UCO in 2024, which was 62% higher year over year, of which 1.3 million mt was from China in January-November, Meda said.