UCO supply reaching its limits
Cornelius Claeys, a biofuels analyst with Stratas Advisor, outlines how he thinks the used cooking oil (UCO) market will fair in 2022.
Claeys will also be presenting at Biofuels International Conference and Expo in Brussels on 5-6 July.
He said: “In Europe and North America, biofuels from UCO witnessed larger absolute growth than any other biofuel segment between 2010 and 2020.
“Roughly as many biofuel volumes from UCO are produced globally today, as from all other liquid biofuel waste feedstocks combined.
“The feedstock’s chemical properties make it suitable for both renewable diesel (HVO) and biodiesel (FAME) production. As core biofuel markets increasingly shift to emission-based blending incentives and some non-waste feedstocks are capped or banned, demand for this seemingly ideal feedstock shows no signs of declining. However, UCO supply is reaching its growth limits. Other low carbon biofuel production pathways will likely take up an increasing share of the market the coming years.
“Volumes of UCO-based biofuels more than quadrupled from 1.48 million metric tonnes (MMT) in 2010 to 6 MMT by 2019. Over that same period, non-UCO global biofuel consumption grew at a more modest 52%. With many restaurants (the main source of UCO) closed around the globe in 2020, UCO biofuel growth stagnated that year.
“As global lockdowns also put downward pressure on total biofuel demand that year, however, the relative share of UCO biofuels continued to grow.
“In 2021, UCO biofuel consumption increased by another 10% compared to 2019 consumption. Last year, an estimated 6.59 MMT of UCO biofuels were consumed globally, compared with 4.27 MMT from animal fats, 1.36 MMT from technical corn oil, 320 kilotonnes (KT) from industrial waste, 260 “KT from agricultural waste, 210 KT from palm oil mill effluent, 150 KT from tall oil, 130 KT from spent bleaching earth and 30 KT from wood waste.
Europe represented 61% of global UCO biofuel consumption in 2021, followed by North America (25%) and Asia-Pacific (12%).
“How much UCO a given country can supply is a function of population, dietary habits, urbanisation rate and collection incentives. France has four times as many inhabitants as the Netherlands, yet Dutch UCO collection volumes were one-third higher than French in 2021. The Dutch have a tradition of deep-frying food in oil, whereas the French use a larger proportion of their vegetable oil in salads while generally preferring cooking in butter to frying. No less than 93% of Dutch people live in cities, where collection systems are easier to implement than in, for example, in remote French villages. One-third of Dutch households bring UCO to centralised collection points. In France, this practice is almost non-existent.
“Austria, Sweden, the UK, Belgium and Ireland are also large UCO suppliers relative to their population. Most southern, central and Eastern European countries are comparatively smaller UCO suppliers. Collection rates in these countries could increase somewhat, yet culinary and logistical barriers remain. Supply growth in Europe is starting to reach its limits.
“It is estimated that an additional 130 KT (+12%) will be collected in 2030 compared to 2021.
With only 1.1 MMT of UCO collected in Europe in 2021, yet with 4 MMT of UCO-based biofuels consumed in the continent that year, it follows that Europe depends on imports for nearly three-quarters of its UCO.
“From Mainland China alone, an estimated 630 MMT of UCO and another 340 KT UCO-based biodiesel (UCOME) was exported to Europe last year. Other major UCO import origins were Malaysia (210 KT), Indonesia (120 KT), Russia (81 KT) and Saudi Arabia (64 KT).
In addition to this, significant volumes of UCOME are imported into Europe from South Korea, Malaysia, and Taiwan. UCO imports from North America continued to fall, from 250 KT in 2018 to 40 KT in 2021, as a flurry of US renewable diesel projects outbid UCO exporters. Neste also exports large volumes of US UCO to its HVO production facility in Singapore, to eventually end up in the Californian market. Global renewable transport fuel quota continue to increase.
“Between 2021 and 2030, Stratas Advisors projects liquid biofuels made from oils and fats like UCO to increase by 14 MMT (+28%). In the EU, for example, palm oil feedstock will be phased out entirely by 2030, and France, Germany, the Netherlands, Belgium, Portugal and Austria are implementing much earlier bans. Some of these countries also have soybean oil bans in the pipeline, and total crop-based feedstocks are capped in all countries (some with a significantly lower ceiling than the 7% EU legislation prescribes).
“Meanwhile, waste feedstocks are incentivised by double counting towards blending mandates, as well as dedicated sub-obligations and additional emission saving credits. Crop feedstocks cannot contribute at all to the EU sustainable aviation fuel obligation that will kick off across the continent in 2025 (starting at 2% and increasing to 5% by 2030).
Yield losses associated with HVO production further add to the demand-side pressure on UCO markets.
“While liquid fuel yield losses are negligible for FAME production, up to 20-25% more feedstock is needed to produce the same volume of road HVO and jet HEFA.
It is projected the HVO and hydroprocessed esters and fatty acids (HEFA) share in European oil-based biofuel demand will increase from 20% in 2021 to 35% by 2030. Over this same period, the share of waste feedstocks in FAME, HVO and HEFA consumption is forecast to increase from 38% to 66%.
“Palm oil consumption will likely drop to near-zero by the end of the decade, from 21% in 2016. These factors combined mean that, although baseline biomass-based diesel consumption in Europe is expected to grow only modestly, UCO demand associated with this will likely see a much sharper increase.
“Given how lucrative UCO collection will remain, global collection efforts are expected to increase. Theoretical global UCO potential could be up to 28 MMT by 2030. However, logistical barriers, rising collection costs, certification requirements, export restrictions, and decreasing quality of marginal UCO, mean this number is purely hypothetical.
“Between 2021 and 2030, US UCO supply is forecast to grow from 1.25 MMT to 1.48 MMT.
In India, UCO supply is very low relative to its population. However, any potential increase in the country’s supply, will not impact global markets much due to its export ban.
China represented 29% of global UCO supply last year. An additional 370 KT Chinese UCO is forecast to be collected by 2030, yet its relative share is projected to decrease somewhat.
“The largest relative increases by the end of the decade are expected in Indonesia (+204 KT), South Korea (+103 KT), Thailand (+60 KT), Malaysia (+58 KT) and Vietnam (+53 KT).”
Claeys will also be presenting at Biofuels International Conference and Expo in Brussels on 5-6 July.
He said: “In Europe and North America, biofuels from UCO witnessed larger absolute growth than any other biofuel segment between 2010 and 2020.
“Roughly as many biofuel volumes from UCO are produced globally today, as from all other liquid biofuel waste feedstocks combined.
“The feedstock’s chemical properties make it suitable for both renewable diesel (HVO) and biodiesel (FAME) production. As core biofuel markets increasingly shift to emission-based blending incentives and some non-waste feedstocks are capped or banned, demand for this seemingly ideal feedstock shows no signs of declining. However, UCO supply is reaching its growth limits. Other low carbon biofuel production pathways will likely take up an increasing share of the market the coming years.
“Volumes of UCO-based biofuels more than quadrupled from 1.48 million metric tonnes (MMT) in 2010 to 6 MMT by 2019. Over that same period, non-UCO global biofuel consumption grew at a more modest 52%. With many restaurants (the main source of UCO) closed around the globe in 2020, UCO biofuel growth stagnated that year.
“As global lockdowns also put downward pressure on total biofuel demand that year, however, the relative share of UCO biofuels continued to grow.
“In 2021, UCO biofuel consumption increased by another 10% compared to 2019 consumption. Last year, an estimated 6.59 MMT of UCO biofuels were consumed globally, compared with 4.27 MMT from animal fats, 1.36 MMT from technical corn oil, 320 kilotonnes (KT) from industrial waste, 260 “KT from agricultural waste, 210 KT from palm oil mill effluent, 150 KT from tall oil, 130 KT from spent bleaching earth and 30 KT from wood waste.
Europe represented 61% of global UCO biofuel consumption in 2021, followed by North America (25%) and Asia-Pacific (12%).
“How much UCO a given country can supply is a function of population, dietary habits, urbanisation rate and collection incentives. France has four times as many inhabitants as the Netherlands, yet Dutch UCO collection volumes were one-third higher than French in 2021. The Dutch have a tradition of deep-frying food in oil, whereas the French use a larger proportion of their vegetable oil in salads while generally preferring cooking in butter to frying. No less than 93% of Dutch people live in cities, where collection systems are easier to implement than in, for example, in remote French villages. One-third of Dutch households bring UCO to centralised collection points. In France, this practice is almost non-existent.
“Austria, Sweden, the UK, Belgium and Ireland are also large UCO suppliers relative to their population. Most southern, central and Eastern European countries are comparatively smaller UCO suppliers. Collection rates in these countries could increase somewhat, yet culinary and logistical barriers remain. Supply growth in Europe is starting to reach its limits.
“It is estimated that an additional 130 KT (+12%) will be collected in 2030 compared to 2021.
With only 1.1 MMT of UCO collected in Europe in 2021, yet with 4 MMT of UCO-based biofuels consumed in the continent that year, it follows that Europe depends on imports for nearly three-quarters of its UCO.
“From Mainland China alone, an estimated 630 MMT of UCO and another 340 KT UCO-based biodiesel (UCOME) was exported to Europe last year. Other major UCO import origins were Malaysia (210 KT), Indonesia (120 KT), Russia (81 KT) and Saudi Arabia (64 KT).
In addition to this, significant volumes of UCOME are imported into Europe from South Korea, Malaysia, and Taiwan. UCO imports from North America continued to fall, from 250 KT in 2018 to 40 KT in 2021, as a flurry of US renewable diesel projects outbid UCO exporters. Neste also exports large volumes of US UCO to its HVO production facility in Singapore, to eventually end up in the Californian market. Global renewable transport fuel quota continue to increase.
“Between 2021 and 2030, Stratas Advisors projects liquid biofuels made from oils and fats like UCO to increase by 14 MMT (+28%). In the EU, for example, palm oil feedstock will be phased out entirely by 2030, and France, Germany, the Netherlands, Belgium, Portugal and Austria are implementing much earlier bans. Some of these countries also have soybean oil bans in the pipeline, and total crop-based feedstocks are capped in all countries (some with a significantly lower ceiling than the 7% EU legislation prescribes).
“Meanwhile, waste feedstocks are incentivised by double counting towards blending mandates, as well as dedicated sub-obligations and additional emission saving credits. Crop feedstocks cannot contribute at all to the EU sustainable aviation fuel obligation that will kick off across the continent in 2025 (starting at 2% and increasing to 5% by 2030).
Yield losses associated with HVO production further add to the demand-side pressure on UCO markets.
“While liquid fuel yield losses are negligible for FAME production, up to 20-25% more feedstock is needed to produce the same volume of road HVO and jet HEFA.
It is projected the HVO and hydroprocessed esters and fatty acids (HEFA) share in European oil-based biofuel demand will increase from 20% in 2021 to 35% by 2030. Over this same period, the share of waste feedstocks in FAME, HVO and HEFA consumption is forecast to increase from 38% to 66%.
“Palm oil consumption will likely drop to near-zero by the end of the decade, from 21% in 2016. These factors combined mean that, although baseline biomass-based diesel consumption in Europe is expected to grow only modestly, UCO demand associated with this will likely see a much sharper increase.
“Given how lucrative UCO collection will remain, global collection efforts are expected to increase. Theoretical global UCO potential could be up to 28 MMT by 2030. However, logistical barriers, rising collection costs, certification requirements, export restrictions, and decreasing quality of marginal UCO, mean this number is purely hypothetical.
“Between 2021 and 2030, US UCO supply is forecast to grow from 1.25 MMT to 1.48 MMT.
In India, UCO supply is very low relative to its population. However, any potential increase in the country’s supply, will not impact global markets much due to its export ban.
China represented 29% of global UCO supply last year. An additional 370 KT Chinese UCO is forecast to be collected by 2030, yet its relative share is projected to decrease somewhat.
“The largest relative increases by the end of the decade are expected in Indonesia (+204 KT), South Korea (+103 KT), Thailand (+60 KT), Malaysia (+58 KT) and Vietnam (+53 KT).”
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