Indonesian sellers of biofuels feedstock used cooking oil (UCO) have had two-thirds of their previously acquired export rights temporarily suspended until 1 May, which they expect to inflate export costs this month by up to threefold.
The 7 February cut to UCO export quotas came as a surprise to some waste oil suppliers, which had been expecting new export curbs announced on 6 February to only apply to sellers of fresh vegetable oils palm oil and palm olein.
Suppliers will now have to treble their fresh cooking oil sales within Indonesia to export the same volume of UCO this month as they would have been permitted to before the new regulation. UCO sellers as a result are now grappling with the prospect of having to try to reduce domestic UCO collection prices, or raise export offers to make up for losses incurred through marketing increased volumes of fresh oil at subsidised rates within Indonesia.
Many sellers agree the latter will be difficult in the current market, with the arbitrage to Europe barely open even at current prices. Argus last assessed UCO fob Indonesia, a flexibag quotation, at $970/t. The feedstock's discount to finished biodiesel UCO methyl ester in the Amsterdam-Rotterdam-Antwerp hub dropped to $488/t on 30 January, its lowest level in two years.
Indonesia introduced the additional export curbs on palm oil and derivatives for the next three months in an effort to boost domestic cooking oil availability ahead of the Eid al-Fitr holiday at the end of April, co-ordinating minister for maritime affairs and investment Luhut Binsar Pandjaitan said on 6 February. The government will allocate reduced export permits on a monthly basis during this period. So it is currently unclear how the ratio of domestic to overseas sales required, and effective export costs, will change after this month.
