North China UCO flips back to premium to FOB Straits

North China used cooking oil prices have flipped back to a premium to UCO FOB Malacca Straits for the first time in over a month, with Chinese buyers' procurement ahead of the Lunar New Year holidays driving a strong rebound in prices over recent trading sessions.

At the same time, Straits UCO market sellers have been adjusting offers down amid a strengthening of the Malaysia ringgit against the US dollar, which has surged to multi-year highs, discouraging exports.

Platts, part of S&P Global Energy, assessed UCO FOB North China at $1,071/mt on Jan. 27, up $21/mt on the day, and at a $26/mt premium to UCO FOB Straits, which was assessed down $5/mt at $1,045/mt.

UCO FOB Straits had been trading at a premium since Dec. 9, when Platts assessed it at $1,060/mt against $1,040/mt for UCO FOB North China.

An Asia-based UCO trader said that Chinese UCO suppliers are now willing to stock up and that UCO prices in China have increased, attributing the price rise to higher local logistics costs and the upcoming holiday.

A Straits-based trader shared a similar view, noting that some participants are restocking early in anticipation of reduced activity during the February holiday period.

A China-based UCO market source noted that local sellers have recently favored selling Chinese UCO domestically rather than exporting, as domestic and export prices are similar but selling locally avoids extra export costs. Export activity could improve if buyers offer higher prices than the domestic market, the source added.

The same source also said that export market offer levels have risen due to purchases from domestic SAF plants. The source noted that export market prices have not kept up with domestic prices, and FOB prices have remained unchanged for some time.

A Chinese trader said that "all Chinese suppliers are now asking for higher FOB offer levels", following a trade done by a SAF plant in eastern China region last week.

"The purchasing activity is mainly to stock up on safety inventory ahead of the long Chinese New Year holidays next month," the trader added.

Straits UCO market down on ringgit strength, lower buying interest

An East Malaysia UCO producer said meanwhile that the Straits UCO market remains relatively quiet, noting that the recent strength of the ringgit was not encouraging exports.

Another West Malaysia-based UCO producer said there has been a drop in offers, adding that the Straits UCO market could mirror the Chinese UCO market's demand, which has been picking up as buyers stock up ahead of the Lunar New Year holidays.

A Malaysia-based UCO supplier said they were considering offering and were currently finalizing the spot market price, given the subdued buying interest from overseas markets for UCO.

Another Malaysia-based UCO trader added that demand in the export market remains quiet, with market participants expecting activity to pick up only after Lunar New Year.

According to a UCO trader based in the Straits, market activity remained subdued as several participants and buyers were still digesting recent policy changes, such as the European Union's RED III. "It will probably get more active on the demand side in late Q1," the trader said.