UCO supply: feedstock competition heats up

From 1 January 2026, the same tonne of used cooking oil is worth two prices: close to full value if it was collected in North America, near zero in the US credit model if it crossed a border. Used cooking oil has stopped being one global commodity.

The molecule has not changed. UCO is UCO whether it came from a fryer in Texas or a restaurant in Kuala Lumpur. What changed in 2026 is that two pieces of policy stopped paying for the molecule and started paying for its origin and its paperwork. The scarce, monetisable asset is no longer UCO tonnes. It is certified, origin-fixed, traceable tonnes that clear one specific jurisdiction's rules. The edge has moved from being near supply to holding supply a jurisdiction will accept.

Why one molecule now carries two prices

A US clean-fuel credit and an EU import rule have split a single global market into separate pools, each open only to feedstock that can prove where it came from.

The US rule bites now. A foreign tonne, Chinese material included, earns no Section 45Z clean-fuel credit: the proposed regulation pays only feedstock produced or grown in the United States, Mexico or Canada for transport fuel made after 31 December 2025.¹ A refiner can still buy a foreign tonne; it just cannot turn that tonne into a credit, so the tonne is mechanically valued near zero inside the US incentive model. The rule is proposed, not final, which is the live falsifier dealt with below, yet the market is already pricing as if it holds.

The EU condition has a date. From late 2027, imported UCO that cannot show a documented chain of custody from collection through processing to delivery does not qualify for the European pool.² Untraceable material is shut out of both demand centres at once.

How the split got built

Three moves built the split, in sequence. First, China ended its 13% UCO export-tax rebate in December 2024, and offers came back at least US$150 a tonne higher; even so, its 2024 UCO exports hit a record near 3 million tonnes worth around US$2.64 billion.³⁴ A US tariff then sharply cut Chinese UCO shipments to US refiners through 2025, roughly halving China's share of US UCO imports, from about 53% to about 27%, and pushing the displaced volume toward Europe and Asia.⁵ The legal mechanics have since been in flux, but the direction held: the market no longer clears to one global price, but to several, each set by which jurisdiction's rules a tonne can satisfy.

The molecule has not changed. UCO is UCO whether it came from a fryer in Texas or a restaurant in Kuala Lumpur.

The strongest case against this view

Only 9% of the ISCC-certified UCO collecting points that campaigners at Transport & Environment examined in China, Malaysia and Indonesia had a sample of their origins audited; for the other 91%, no audit verified the source.¹¹ That is the bear case in one number.

The honest counter is that these rules are easy to announce and hard to enforce. UCO is a fungible liquid, easily commingled, with a documented history of mislabelled origin. The mismatch shows in the trade: Indonesia's residue and UCO production capacity has been put at around 300,000 tonnes against close to 5 million tonnes of such material exported in 2023, a gap analysts read as virgin palm oil mixed in, though it is an inference rather than an audited finding, and Malaysia's regulator moved against export fraud in early 2025.¹² If chain-of-custody regimes can be gamed, the premium for certified material may not hold, and the older view that proximity wins is correct.

That case is, on today's evidence, the stronger of the two dated reads. The audit gap is a measured present-day fact, whereas the enforcement the bull case rests on has mostly not started, with the EU regime biting in late 2027 and the US rule not yet final. The thesis here is forward, not observed: it holds only if certification hardens faster than the fraud outruns it.

The cleanest test is a price. As a guide, late-May 2026 trade-press assessments put UCO at around US$1,336 a tonne and the UCO methyl ester at around US$1,681, a spread of roughly US$345; the same complex's margin had touched about US$135 a tonne in early April, against the US$300 to US$400 producers reportedly need for healthy margins.¹³ Those are dated levels, not official prints, and the market reprices weekly, so the signal to watch is the trend, not the print: a persistent gap between traceable and untraceable material confirms the thesis, while convergence toward parity falsifies it.

What this looks like in South East Asia

The repricing lands hardest where the feedstock is collected, and South East Asia is now both a major source and a contested one. Singapore has become an Asian UCO hub, with imports of roughly 737,000 tonnes in 2024, up about 56% on the prior year, drawn in by renewable-fuel refinery demand.⁶ Malaysia's UCO exports, by contrast, are expected to face pressure in 2026 as the country builds its own sustainable aviation fuel (SAF) capacity and competes for its own feedstock.⁷

Read against the two rules, the regional picture sharpens. Demand for SAF and renewable diesel keeps pulling on a collectable resource that is capped, while the eligible pools narrow to material that can prove origin and chain of custody. Documentable South East Asian supply gains an option value that a simple "be near the supply" framing cannot capture. The same quality-and-provenance signal shows up across recycled materials and in rPET spreads: California deposit-return-scheme PET bales reportedly command a premium over kerbside material, because traceable, high-purity feedstock is the kind that clears food-contact specification most reliably.⁸

The edge has moved from being near supply to holding supply a jurisdiction will accept.

What the structural squeeze looks like

Collection, not demand, is the binding ceiling on UCO. Global collectable UCO was put in the order of 14 million tonnes on a 2023 estimate, projected toward roughly 31 million tonnes by 2030 at the upper end, a near-doubling that assumes collection-rate gains which may not materialise.⁹ On any realistic path the resource stays capped relative to legislated demand, a constraint the International Energy Agency reached from the other direction: it has framed UCO and animal fats as approaching the limits of available supply as SAF and renewable-diesel mandates scale.⁹ Treat the supply figure as a wide range, not a point.

The demand side is legislated, not optional. ReFuelEU Aviation sets a binding minimum SAF blend at EU airports, starting at 2% from 1 January 2025 and rising to 6% by 2030, 20% by 2035 and 70% by 2050.¹⁰ When a resource is capped and the demand pulling on it is written into law, whoever controls the provable, jurisdiction-eligible share captures the scarcity. The wider 2026 picture across feedstocks and recycled materials is set out in the circular-materials outlook, and the conversion-and-financing side of the regional story in the waste-to-energy financing note.

The base, better and worse cases

Most likely, the rules hold and harden roughly on schedule: 45Z keeps paying North-American-origin feedstock only, the EU chain-of-custody condition phases toward its November 2027 enforcement, and the market stays split into pools where certified, origin-fixed tonnes command a durable premium and untraceable material trades nearer fuel value.

Better for the provenance thesis, enforcement tightens faster than expected: the EU regime proves strict, transshipment routes close, the US sourcing rule survives finalisation intact, and the premium for demonstrably eligible tonnes widens.

Worse, enforcement proves porous. The EU rule is delayed, diluted or routinely circumvented, the US 45Z restriction is reversed in finalisation or carved out by trade deals, and UCO re-converges toward a single global price, where proximity is again the whole story. A separate downside sits on demand: if SAF and renewable-diesel mandates soften, the whole complex loosens and the certified-versus-uncertified distinction matters less.

What this means and what to watch

In UCO, the decisive variable in 2026 is no longer how close you sit to supply but whether your supply can clear a specific jurisdiction's rules. Value is migrating toward certified, origin-fixed, traceable tonnes, with the rest repricing toward fuel, though that migration is a forward bet on enforcement arriving, not yet an observed fact.

For anyone weighing UCO-linked exposure, three questions matter most:

• Can a seller demonstrate a documented, auditable chain of custody from collection to delivery, of the kind the EU rule will require, or is a "traceable" premium merely asserted?
• Which jurisdiction's rules is a given tonne actually eligible for, and how exposed is a counterparty's model to the 45Z North-American-origin restriction, that is, does its value depend on a credit pool its feedstock cannot reach?
• How durable is the regulation the value rests on, given the real risk that enforcement slips or transshipment reopens?

The three signposts that would prove or break the view: the price gap between certified and uncertified UCO in North West Europe; whether the US 45Z North-American-origin rule survives finalisation; and implementation of the EU chain-of-custody rule toward its November 2027 enforcement.

Notes

1. US Section 45Z clean fuel production credit: proposed regulations restrict feedstock eligibility to material produced or grown in the United States, Mexico or Canada for transportation fuel produced after 31 December 2025, which mechanically disqualifies imported (including Chinese) UCO from credit value. Status: PROPOSED, not final — proposed regulations issued 3 February 2026 (Federal Register, REG-121244-23 / 2026-02246, published 4 February 2026); comment period closed 6 April 2026; public hearing 28 May 2026; no final rule published as of mid-June 2026. The final text is pending and is the live falsifier for this piece. Source: US Treasury/IRS proposed regulations, Section 45Z (Federal Register 2026-02246), integrating the One Big Beautiful Bill Act 2025; North-American-only rule and proposed status corroborated via IRS newsroom and law-firm analyses (Feb 2026). As of 4 February 2026. https://www.federalregister.gov/documents/2026/02/04/2026-02246/section-45z-clean-fuel-production-credit
2. Commission Regulation (EU) 2025/2181 (amending Regulation (EU) No 142/2011) tightens UCO import rules: imported UCO must originate from approved/registered establishments in the exporting country with a documented chain of custody from collection through processing to delivery; the ban on mixing UCO with other oils and fats is reinforced; an importer's declaration on an official template is required. Published 30 October 2025; roughly two-year transition; new requirements enforceable from 19 November 2027. Exact article numbers to be confirmed against the Official Journal text before publication. Source: Commission Regulation (EU) 2025/2181 (EUR-Lex OJ/CELEX 32025R2181); publication and 19 November 2027 enforcement date corroborated by customs and trade-data analyses. As of 30 October 2025. https://eur-lex.europa.eu/eli/reg/2025/2181/oj/eng
3. China terminated its 13% export tax rebate on used cooking oil (HS 151800): announced 15 November 2024, effective 1 December 2024. FOB China offers were withdrawn and returned priced at least US$150 a tonne higher. Source: USDA Foreign Agricultural Service, "China: UCO Export Tax Rebate Terminated"; corroborated by Agri-Pulse and S&P Global Commodity Insights (27 November 2024). As of 1 December 2024. https://www.fas.usda.gov/data/china-uco-export-tax-rebate-terminated
4. China's 2024 UCO exports reached an all-time high of nearly 3 million tonnes worth around US$2.64 billion, on demand from the US, the EU and Singapore. Source: S&P Global Commodity Insights, "China data: 2024 UCO exports hit all-time high" (3 February 2025). Volume reported by trade press. As of 3 February 2025. https://www.spglobal.com/energy/en/news-research/latest-news/refined-products/020325-china-data-2024-uco-exports-hit-all-time-high-on-demand-from-us-eu-singapore
5. A punitive US tariff effectively halved Chinese UCO shipments to US refiners during 2025 (a headline reciprocal rate took effect in May 2025, diverting volume to Europe and Asia; China's share of US UCO imports fell from roughly 53% to roughly 27%, not to zero, so roughly half the prior flow continued). On 20 February 2026 the US Supreme Court invalidated the IEEPA tariff authority underpinning the reciprocal rates; the administration replaced them with a Section 122 global surcharge (initially around 10%, then announced rising toward 15%). Reported qualitatively; the live rate has been in flux since the February 2026 ruling and is not stated here as a fixed figure. Source: tariff impact and diversion via Reuters (Advanced Biofuels USA) and the NDSU Agricultural Trade Monitor (Feb 2026), trade press; Supreme Court ruling and Section 122 replacement per Holland & Knight, BDO, Perkins Coie and Troutman (20 February 2026). As of 20 February 2026. https://www.hklaw.com/en/insights/publications/2026/02/supreme-court-strikes-down-ieepa-tariffs
6. Singapore UCO imports rose to roughly 737,000 tonnes in 2024, up about 55.6% on 2023, driven by renewable-fuel refinery demand. Trade-press figure, reported qualitatively. Source: S&P Global Commodity Insights, "Commodities 2025: Asian UCO export landscape" (7 January 2025). As of 7 January 2025. https://www.spglobal.com/commodity-insights/en/news-research/latest-news/refined-products/010725-commodities-2025-asian-uco-export-landscape-faces-tightening-amid-policy-shifts
7. Malaysia's UCO exports are expected to face pressure in 2026 as domestic SAF production scales and competes for the same feedstock. Trade-press, reported qualitatively. Source: Hydrocarbon Processing, "Malaysia's used cooking oil exports to face pressure in 2026 on domestic SAF production" (November 2025). As of 30 November 2025. https://hydrocarbonprocessing.com/news/2025/11/malaysias-used-cooking-oil-exports-to-face-pressure-in-2026-on-domestic-saf-production/
8. California deposit-return-scheme-collected PET bales were valued above kerbside-collected PET, a provenance premium in a sister molecule. Directional only; a vendor source citing US deposit-return-scheme data, reported qualitatively, not a measured spread, and not proof UCO behaves identically. Source: TOMRA, citing US deposit-return-scheme data. As of 30 April 2025. https://www.tomra.com/about-tomra/circular-economy/deposit-return-schemes/what-can-deposit-return-schemes-deliver
9. Global collectable UCO was put in the order of roughly 14 million tonnes, projected toward roughly 31 million tonnes by 2030 (upper end), a near-doubling that assumes material collection-rate gains. Present as a wide range and an estimate, not a point. Source: S&P Global estimate for the ~14 to ~31 million tonne range, via Biofuels International, "UCO supplies set to double to 31 million metric tonnes by 2030" (5 October 2023). As of 5 October 2023. https://biofuels-news.com/news/uco-supplies-set-to-double-to-31-million-metric-tonnes-by-2030/

The International Energy Agency framing is separately attributed: the IEA found that demand for UCO and animal fats "nearly exhausts 100% of estimated supplies over the forecast period" of 2022 to 2027, as SAF and renewable-diesel mandates scale — cited as attributed framing, not a numeric anchor in the body. Source: IEA, "Is the biofuel industry approaching a feedstock crunch?" (analysis published December 2022; forecast horizon 2022 to 2027), corroborated by Biofuels International, "IEA: biofuel feedstock supply crunch within five years" (7 December 2022). As of 7 December 2022. https://www.iea.org/reports/is-the-biofuel-industry-approaching-a-feedstock-crunch

1. ReFuelEU Aviation (Regulation (EU) 2023/2405) sets a binding minimum SAF blend at EU airports, starting 2% from 1 January 2025, rising to 6% by 2030, 20% by 2035 and 70% by 2050, with a synthetic e-fuel sub-mandate from 2030. Source: European Commission, ReFuelEU Aviation regulation (Regulation (EU) 2023/2405); corroborated by EASA. As of 1 January 2025. https://transport.ec.europa.eu/transport-modes/air/environment/refueleu-aviation_en
2. Campaigners at Transport & Environment found that only 9% of the ISCC-certified UCO collecting points they examined in China, Malaysia and Indonesia had a sample of their points of origin audited; for the remaining 91%, no audits verified the source. NGO advocacy source, scoped to the points T&E examined; attributed, not stated as a measured market fact. Source: Transport & Environment, "Used Cooking Oil: The Certified Unknown" briefing (©2026). As of 22 June 2026 (date the T&E briefing was accessed). https://www.transportenvironment.org/articles/uco
3. Indonesia's residue/UCO production capacity has been put at around 300,000 tonnes, against almost 5 million tonnes of such material exported in 2023, a gap analysts read as virgin palm oil mixed in; Indonesia moved to curb such exports, and Malaysia's regulator (MPOB) moved to crack down on export fraud in February 2025. The volume mismatch is an inference, not an official audit finding, and the two figures are not strictly like-for-like (a UCO-capacity estimate against a broader residue-and-UCO export category). Source: Transport & Environment analysis (via Hellenic Shipping News); Reuters/BusinessWorld on the Malaysia MPOB crackdown (17 February 2025). As of 17 February 2025. https://www.bworldonline.com/agribusiness/2025/02/17/653559/malaysia-cracks-down-on-cooking-oil-export-fraud/
4. For the week ending 28 May 2026, UCO (ISCC, DDP North West Europe) was assessed at around US$1,336 a tonne and UCO methyl ester (FOB ARA) at around US$1,681, a spread of roughly US$345, with UCO supported by limited spot availability and demand for Europe-origin material. The same margin spread had touched about US$135 a tonne on 9 April 2026 (its 2026 low), against the roughly US$300 to US$400 a tonne producers reportedly need for healthy margins. Trade-press assessments, reported as dated levels, not official prints; the market reprices weekly and these levels are late-May 2026. Source: Fastmarkets European biofuel feedstock assessments. As of 28 May 2026. https://www.fastmarkets.com/insights/european-biofuel-feedstock-price-spreads-widen-as-gasoil-drops-by-138-t-week-on-week/