- Bullish (China UCO): Pre-Lunar New Year stockpiling, higher logistics costs, and stronger domestic SAF demand have pushed UCO FOB North China to a $26/tonne premium over Straits.
- Bearish (Straits UCO / Black Sea vegoils): Weak export demand from the Straits amid a strong Malaysian ringgit and only limited, temporary substitution upside for Black Sea sunflower oil keep overall sentiment neutral to bearish.
Chinese UCO Market Overview
Used cooking oil (UCO) FOB North China surged to $1,071/tonne on January 27, rising $21/tonne day-on-day and, for the first time since December 9, trading above Malaysian Straits values. The move reverses the previous structure where Straits UCO held a premium over North China through mid-December.
Chinese suppliers are prioritizing domestic buyers ahead of the extended Lunar New Year holidays, focusing on safety stock replenishment. With domestic prices now comparable to export levels and transaction costs lower at home, local sellers are increasingly favoring internal sales over seaborne exports.
Market participants report that all major domestic suppliers have raised FOB offers after a recent purchase by a sustainable aviation fuel (SAF) plant in eastern China, which signaled stronger internal demand for UCO as a feedstock.
Malaysian Straits UCO Dynamics
In the Straits market, UCO prices softened by $5/tonne amid sluggish export demand. Producers in East and West Malaysia highlight that the Malaysian ringgit’s appreciation to multi-year highs against the US dollar is eroding export competitiveness, discouraging fresh overseas sales despite constrained supply.
Overseas buying interest is described as muted, and most market participants expect trading activity to remain subdued until after the Chinese New Year period. One trader anticipates that tangible demand recovery is more likely toward the end of the first quarter, once buyers digest implications from EU RED III policy changes.
Holiday Logistics and SAF Demand in China
Concurrent with holiday-driven stockpiling, Chinese logistics costs have risen, adding another layer of support to domestic UCO prices. SAF factories have stepped up procurement, tightening availability for exports and elevating the value of supplies that remain onshore.
Although increased SAF purchasing has lifted overall supply flows into processing, export FOB prices have not fully kept pace with domestic gains, reinforcing the preference among Chinese sellers to allocate volumes to local buyers in the near term.
Price Comparison and Recent Moves
| Market | Contract / Date | Price (FOB) | Day-on-Day Change | Spread vs Other Market |
|---|---|---|---|---|
| North China UCO | Jan 27 | $1,071/tonne | + $21/tonne | $26/tonne above Straits |
| Straits UCO | Jan 27 | $1,045/tonne | − $5/tonne | $26/tonne below North China |
| North China UCO | Mid-Dec reference | $1,040/tonne | – | $20/tonne below Straits |
| Straits UCO | Mid-Dec reference | $1,060/tonne | – | $20/tonne above North China |
Implications for Black Sea Vegetable Oil Markets
The current Chinese pre-holiday stockpiling phase is diverting UCO away from export channels, reducing immediate competition for alternative feedstocks such as Black Sea sunflower oil. Simultaneously, the stronger Malaysian ringgit is curbing Straits-origin exports, in theory improving the relative appeal of Black Sea supplies.
However, this support is constrained by the temporary nature of holiday-driven purchases and expectations of subdued demand immediately after the Lunar New Year. Black Sea sunflower oil traders should closely track whether Chinese buyers return to international markets and potentially seek alternative feedstocks once domestic UCO availability normalizes in late Q1 2024.
Source: Market Data
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