ASIA SAF ROUNDUP: Higher feedstock prices raise Asia SAF cost of production in Oct

The Asian sustainable aviation fuel’s cost of production closed higher in October, with the Platts-assessed used cooking oil-based SAF rising $25.27/mt, or 1.51%, on the month to close at $1,693.72/mt Oct. 30 and palm fatty acid distillate-based SAF surging $71.55/mt, or 4.17%, to $1,787.11/mt over the same period, S&P Global Commodity Insights data showed.

Platts launched an SAF FOB Straits price reflecting the current market fundamentals on Oct. 1. Prices increased by $60/mt over the month to reach $1,772.50/mt on Oct. 30, according to data from Commodity Insights.

Feedstock price was the primary driver of SAF's higher cost of production, taking up more than 75% of overall costs. China's UCO FOB export prices increased due to higher domestic UCO prices in October. Domestic UCO prices saw offers climbing over the month to Yuan 6,000-6,200/mt in the week to Oct. 30 on stronger demand and higher collection prices, according to market sources.

“Some suppliers are reducing their export volumes to supply domestic demand,” according to a trader.

A China-based source added that depleting inventories, coupled with unfulfilled orders, led to higher collection prices for UCO, thereby pushing up domestic UCO offers.

“Even low-quality, high-sulfur UCO is going for above Yuan 5,500/mt,” he said.

PFAD prices soared over the past month after the largest producers Indonesia and Malaysia announced larger biodiesel targets and higher taxes, respectively, while lowering production outlooks.

Malaysia's palm oil production in October declined month on month, with yield down 7.54%, oil extraction rate up by 0.05% and overall production decreasing by 7.3%, the Southern Peninsular Palm Oil Millers Association said.

Indonesia also expanded its export quota rules on palm oil to include palm oil mill effluent, a byproduct used as a biodiesel feedstock, the country’s Ministry of Trade said Oct. 17.

This move follows Jakarta’s increase in the export levy on POME to 7.5% of the crude palm oil reference price from a flat levy structure on Sept. 18.

European spot appetite slows

European sustainable aviation fuel prices ended October higher, though fundamentals remained weak with buyers well covered for the end of the year and tepid demand for taking spot volumes ahead of 2025.

Platts assessed SAF CIF NWE up 0.8% at $1,810/mt on Oct. 31, pulling away from the floor reached in late September. The SAF CIF NWE premium edged down 0.9% to $1,060/mt, the lowest since Platts launched the assessment in September 2023, Commodity Insights data showed.

“The market will be relatively flat until spring; however, prices have come off a little as the expected production cost for next year is likely to go down,” a trader said. “Used cooking oil prices will go down, operational costs will go down.”

While activity is expected to pick up at the turn of the year, participants expect there would be little done in the way of spot deals, with business in the first and second quarters more likely for delivery later in 2025.

Refinery disruptions in California

California experienced a string of refinery disruptions in the Los Angeles area, contributing to lower output and production in October.

Platts assessed the SAF California market 30.18 cents higher on the month at $7.0673/gal. Similarly, California Aviation Turbine Fuel, which consists of 30% SAF and 70% kerosene/jet fuel, increased by 3.95% to $5.316/gal, hitting a nearly two-month high Oct. 7, when it was assessed at $5.3812/gal, data from Commodity Insights showed.

US Customs import data released Oct. 31 showed three separate SAF shipments arrived in California in October. The cargoes were shipped by Neste and originated from Singapore. The first delivery reached the port of San Francisco Oct. 14, comprising 43,500 barrels of SAF.

Following this, two additional shipments arrived at the Port of Los Angeles, with the second shipment landing Oct. 22 and containing 96,024 barrels, while the third shipment followed closely, arriving Oct. 30 with a substantial 109,426 barrels. This latest cargo adds to the total volume of SAF shipped to the US since the beginning of the year, with volumes now reaching 1.48 million barrels.

What’s next in Asian SAF markets?

Unlike the EU and the US, Asia is a fragmented market without solid policy and legislation development for SAF’s adoption. Asia though plays a significant role in SAF production and feedstock trade. In November, market sources will focus on the US presidential elections and the implications on China-US trade relations.

The IATA forum is scheduled in Kuala Lumpur in November and the SAF market continues to see discussions about Asia’s potential in the overall trade flows.