ASIA SAF NOV ROUNDUP: China UCO tax rebates removal drives Asia SAF prices higher

The Asian sustainable aviation fuel's cost of production closed higher on the month in November, with the Platts-assessed used cooking oil-based SAF surging $184.41/mt, or 10.89%, on the month to close at $1,878.13/mt Nov. 29 and palm fatty acid distillate-based SAF rising $146/mt, or 8.17%, to $1,933.11/mt over the same period, S&P Global Commodity Insights data showed.

For SAF FOB Straits, prices soared $356.25/mt on the month to $2,128.75/mt Nov. 29, according to data from Commodity Insights.

UCO rises on Chinese tax rebate news

In a statement Nov. 15, China's finance ministry said that from Dec. 1, it will end tax relief for exports of products spanning aluminum, copper and biofuel feedstocks, which previously benefited from a 13% rebate on export duties.

The news sparked a flood of used-cooking oil exports as suppliers attempted to squeeze as much product out before the measures became effective Dec. 1.

"Now there is a rush for loading before Dec. 1. So, I think there is going to be a lot of UCO coming in from China, but then after that we will probably see a decrease," a source said.

Following the ruling, the prices of UCO North Asia has jumped and reached its highest price point in Nov at $1,000/mt on Nov. 21, S&P Global Commodity Insights data showed.

"I heard some China UCO bulk suppliers already breached their contracts, so buyers need to find other sources to fulfill the quantity for loading," a second source said.

Straits UCO market supplies were tight amid high crude palm oil prices. Straits UCO sellers leveraged on the overall higher valuations for Asia UCO to raise their offers in tandem. Offers rose to above $1,000/mt FOB Straits over the same week, with a trade heard done at $950/mt for December bulk shipment.

In addition, Donald Trump's reelection as the US president sparked uncertainty in China UCO prices, driving demand in the Straits feedstock market, according to a Straits-based supplier.

The general market outlook following the news of the export cancellation has been that by retaining more UCO within China, the government aims to stabilize domestic supply, potentially paving the way for future mandates on SAF and other biofuel-supportive measures.

"China is most likely moving towards having a SAF mandate of sorts within the country and is gearing up on how to utilize their own UCO with all the recent issues with the West," a third source said.

The USDA also said Nov. 26 that China's decision earlier this month to remove a 13% tax rebate for UCO exports effective December would both lower the incentive for fraud and keep more material in the country for renewable diesel and sustainable aviation fuel production.

Asia sees more developments on SAF supply

Southeast Asian countries has been announcing new initiatives to boost SAF.

Malaysia is considering several tax incentives to attract investors for building a SAF production hub, leveraging its palm oil prowess to tap into global markets, Malaysia's Plantation and Commodities Minister Johari Ghani said in the parliament meeting Nov. 26.

Thailand's energy firm Bangchak Corporation Public Company Limited has also announced a SAF supply agreement with Singapore-based Shell International Eastern Trading Company Nov. 12. The agreement stipulates the offtake of ISCC EU/CORSIA certified SAF for delivery to Shell. The collaboration and supply arrangement between Bangchak and Shell marks a significant advancement in the use of SAF.

More Chinese producers are also entering the space with the latest being Jiaao Biotech's subsidiary, Lianyungang Jiaao New Energy, announcing they have produced SAF in Lianyungang City, meeting ISCC standards and aligning with China's carbon goals. The company plans to convert 500,000 mt of waste oil into bioenergy for aviation fuel.

Europe sees higher SAF price while US SAF prices slip

Sustainable aviation fuel prices in Europe rose during November amid an uptick in demand for December deliveries and lower stock levels.

Platts assessed SAF CIF NWE premium over jet cargoes 37% higher during the month to Nov. 29, closing at $1,459/mt, Commodity Insights data showed.

In the US, SAF prices fell over the month as the industry navigates evolving regulatory landscapes with stakeholders assessing the potential impacts on market dynamics and future growth, particularly in light of the uncertainty surrounding the new 45Z tax credits.

The Platts-assessed SAF California price fell 0.19% on the month to $7.0202/gal on Nov. 27. Similarly, in the SAF Illinois market, it assessed the SAF Illinois price at $8.4353/gal, 0.57% lower over the same period, Commodity Insights data showed.

What's next in Asian SAF markets?

Heading into 2025, Asia remains a focal point for SAF supply, especially with the Refuel EU Aviation initiative coming into effect in 2025.

Another key policy shift would be the transition of the US federal tax credit under the Inflation Reduction Act from the Blenders Tax Credit to the Clean Fuel Production Credit, effective Jan. 1, 2025 -- a major shift in US biofuel policy. It will focus on emissions reduction rather than incentivizing blended renewable fuel volumes.