Australian tallow likely to gain edge as US tariff gap with Brazil widens

The Australian tallow market has moved into wait-and-see mode after revised US tariffs widened the cost gap between Australian and Brazilian tallow, raising uncertainty over trade flows, delivered costs, and demand from US buyers, sources told Platts July 27.

Market participants said the changes could make Australian tallow more competitive in the US, as Brazilian beef tallow now faces a combined 37.5% tariff, compared with a 12.5% tariff on Australian exports. However, buyers and sellers are still assessing inventories, existing contracts, and potential price adjustments before making major purchasing decisions.

The US announced a 12.5% tariff on Australian exports following its Section 301 investigation into forced labor. The tariff replaces the existing 10% Temporary Import Surcharge, which was due to expire July 24.

Meanwhile, Brazilian beef tallow now faces the higher tariff after a 12.5% levy tied to forced labor practices was applied July 24, adding to a 25% tariff imposed the previous week.

Some market participants said Brazilian tallow could still move to the US if exporters absorb part of the tariffs.

"If the Brazilian producers can absorb a good portion [of the tariffs], I think it might work. I think [the market] will be open at certain periods, not all the time," a US-based source said.

Australian supply gains advantage

Australia-based participants said the wider tariff spread between Australian and Brazilian tallow could support Australian exports to the US, as the delivered cost of Australian material may be lower than the Brazilian supply, subject to the full 37.5% tariff.

"Based on the current situation, I think the effect on the Australian tallow market is likely to be supportive rather than negative," an Australia-based source said. "If Brazilian tallow becomes more expensive for US buyers, Australian tallow immediately becomes a more attractive alternative. US buyers are likely to increase inquiries from Australia, New Zealand, and other tariff-free suppliers."

The source added that even if Australia cannot fully replace Brazilian volumes, any additional US demand would likely support Australian export prices.

Recent trade data in the S&P Global Energy Advanced Feedstock Analyst report also points to stronger Australian tallow exports. Australia's tallow exports reached 69,000 metric tons in May, up 87% from the same month a year earlier, with the US the single largest destination, the report said.

Buyers await before new purchases

Despite expectations of stronger US interest, many market participants are still analyzing the tariff changes and awaiting more clarity on trade flows before making purchasing decisions.

"I think many participants are still in wait-and-see mode, as many still have enough stock to cover after buying last month," a second US-based trader said, adding that "many are not looking to buy yet, as they are still checking the market, and the Australian market is more stable right now."

The Australia-based source shared a similar view, saying prices are relatively stable as buyers and sellers wait to see the full impact of the US tariff changes before making major moves.

"The US tariff on Brazilian tallow has not yet caused a significant price reaction in Australia because existing contracts and inventory positions are still flowing through," the Australian source said. "Also, Brazilian suppliers may start adjusting FOB offers."

Platts, part of S&P Global Energy, assessed beef tallow FOB East Coast Australia at $1,325/mt on July 22, unchanged week on week. Australian tallow is currently at a $125/mt premium to Brazilian tallow, which was assessed at $1,200/mt FOB Santos Waterborne July 24.

Another Australia-based source said the US could import finished biodiesel or renewable diesel to generate Renewable Identification Numbers to meet mandates, potentially replacing Brazilian tallow.

"The US can import finished fuel, BD or RD, to generate RINs to meet the mandate, so it is possible that finished renewable fuel replaces the Brazil tallow," the source said.

The market is expected to watch price movements across major tallow-producing regions as buyers reassess post-tariff landing costs. The situation remains uncertain, as stronger US demand for Australian tallow could support prices, while supplier concessions on tariffs may limit gains.