FEDIOL, the industry association representing the vegetable oil and protein meal sector, on 25th May raised concerns over the surge in imported biodiesel, highlighting its disruptive impact. Simultaneously, Mintec has learned, according to market players, that waste oil from China, labelled as Used Cooking Oil (UCO), may be contaminated with significant amounts of palm oil, undermining its green credentials.
With FEDIOL stressing the urgency of investigating the authenticity of these biodiesel imports and highlighting abnormal market behaviour, the rapeseed market has been severely affected. Over the past six months, rapeseed oil prices have plummeted significantly, reaching the lowest level since June 2020, according to Mintec's Benchmark Price for Rapeseed Oil FOB Rotterdam, which stood at €774.50/mt on 25th May. The decline in prices can be attributed, in part, to the reduced demand from the biodiesel sector. Market players have shown limited interest in purchasing rapeseed oil as they import second-generation biofuels from China due to supposed sustainability benefits.
Mintec reports here and industry sources suggest that substantial amounts of palm oil may have been mixed with the alleged used cooking oil, raising doubts about its green fuel status. Market contacts speculate that FEDIOL's announcement could result in increased scrutiny or a complete ban on Chinese waste fuel exports to the EU. This development could have far-reaching implications; UCO and other waste fuels have gained popularity for their perceived sustainability and competitive pricing compared to other vegetable oils suitable for biodiesel production. Consequently, industry insiders anticipate a surge in demand should action be taken on this front for alternative oils, potentially leading to price hikes.
Moreover, FEDIOL emphasises that the surge in imports not only affects the oil market but also impacts rapeseed farmers' revenue and future planting decisions. Mintec has explored the critical link between the current low rapeseed prices, the probability of unfavourable weather conditions with a potential emerging El Nino, and farmers' planting decisions. These factors could lead farmers to choose alternative crops or reduce rapeseed cultivation. This scenario could significantly reduce production levels, potentially driving rapeseed prices higher and exerting upward pressure on rapeseed oil prices throughout 2024, as stated by market players.
The European feedstock market faces a period of disruption as concerns regarding imported biodiesel contamination grow. FEDIOL have now sounded the call for thorough investigations to ensure market transparency and take appropriate action to restore stability and sustainability to the industry although no talk of a temporary suspension has been heard thus far. The implications of these developments resonate across various sectors and underscore the need for a comprehensive approach to safeguard the European feedstock market's integrity and long-term viability.
Mintec will update this story as more details emerge.