Indonesian UCO exporters to contest new export rules

Indonesian used cooking oil (UCO) exporters will form an association to lobby against new export restrictions that will curb overseas sales of the waste biodiesel feedstock from today, sources close to the matter told Argus.

Exporters of UCO, palm olein and crude palm oil (CPO) must start submitting proof of domestic sales to obtain export licenses in line with new requirements Jakarta announced last week. The measure has been billed as a step to ease cooking oil prices by ensuring domestic supply at subsidised rates, but market participants are unsure why UCO has been included in the ruling.

Palm olein and CPO exporters can retail a percentage of their cooking oil domestically to conform to the new rules, but there is no domestic market for UCO as Indonesian biodiesel producers are subsidised to run abundant cheaper palm oil feedstocks. UCO exporters are generally not involved in palm oil production and do not have access to olein for domestic retailing.

In reaction to the regulations, the country's UCO exporters are gathering in Jakarta today, aiming to create an industry association and elect a leader. The newly-formed organisation then plans to meet with the trade ministry to persuade it to adjust domestic sales obligation rules specifically for the UCO sector.

The restriction on Indonesian UCO exports may tighten southeast Asian supply and boost prices at a time when record CPO prices and flooding disruptions are already supporting values near all-time highs despite wavering prices for finished biodiesel UCO methyl ester. Argus assessed UCO fob Malaysia/Indonesia at $1,182.50/t for the last two weeks, almost 37pc higher than its value a year ago.

By Lauren Moffitt