Why aren’t used cooking oil (UCO) prices rising — and what does it mean for margins?

UCO supply: an underestimated issue?

Five structural factors behind UCO price stagnation

1. UCO sellers are price takers, far from end markets

Upstream players, particularly collectors, are not market drivers. They remain price takers, exposed to market fluctuations in a highly fragmented market. The bargaining power of UCO collectors is closely tied to market evolution and to buyers’ BID/ASK benchmarks and broker reports.

Even when buyers’ margins are significant, as in the case of HVO or SAF — UCO sellers do not hold greater negotiating power than UCOME producers. The only path to improved margins is through value creation: shifting toward BULK FOB terms or delivering higher-quality feedstocks.

2. UCOME: the historical driver that has become the primary loser

Historically, UCO demand was primarily driven by the UCOME market, which remains a key outlet today. As a result, UCO pricing structures have long been anchored to UCOME market dynamics. New demand segments such as HVO and SAF have entered the market, but typically align their bid levels with the existing UCOME-based pricing framework to avoid becoming price drivers.

However, this balance could evolve in the coming years. The rapid expansion of HVO and SAF production capacity may progressively rebalance demand and shift the primary price-setting mechanism for UCO. In addition, blend walls limit UCOME incorporation, exerting downward pressure on its price — dragging UCO prices down in its wake.

3. Arbitrage toward advanced feedstocks

Over the past two years, the advanced biofuels market has become more economically attractive than the traditional UCOME market. UCOME producers have increasingly adjusted their procurement strategies, shifting toward alternative inputs:

• Used Decolorizing Oil (SBEO)
• Oil mill effluents
• Acid oils
• Tall oil
• Biowaste

This trend is driven by stronger demand and more attractive margins in advanced pathways, even as those margins have also declined.

4. Easing EU-US competition and rising global collection rates

Competition between the EU and the US to secure UCO volumes from Asia has significantly eased. The US — historically importing around 1.6 million tonnes of UCO — has largely withdrawn from the import market, primarily due to the introduction of tariffs and a strategic shift toward domestic feedstocks such as animal fats and soybean oil.

At the same time, collection rates continue to increase across most regions globally, notably in South America, India, and Southeast Asia. This easing of global competition has not supported prices, as increased available supply offsets reduced US demand.

5. Indirect exposure to the paper market

UCO is indirectly exposed to the paper market. UCOME, while challenged by HVO, is significantly driven by financial markets whose volumes are 5 to 10 times those of the physical UCO market. This creates price disconnects influenced by actors not directly involved in physical flows.

Horizon 2027-2030: toward structural rebalancing?

In the past, UCOME pricing was relatively straightforward, largely driven by double-counting mechanisms. Today, the landscape is changing significantly:

• UCOME is now capped
• first-generation FAME is also capped
• advanced FAME remains subject to minimum incorporation requirements due to blend walls

This structural shift implies that advanced FAME will consistently trade at a premium over conventional FAME. At the same time, Annex IX-B feedstocks (including UCO) remain under a cap, with no binding obligation to incorporate beyond a certain level. In this context, UCOME pricing is expected to be increasingly driven by conventional FAME fundamentals.

Key questions for the market

Several structural questions define the 2027-2030 outlook:

• Will UCOME, with a ~90% GHG reduction, simply be compared to other biodiesel pathways offering similar GHG performance, with purchasing decisions primarily driven by relative production costs?
• Will UCOME compete directly with conventional FAME (e.g. RME) when adjusted for GHG performance through mechanisms such as ESCA?
• Could UCO progressively be diverted away from the UCOME market toward higher-value outlets such as SAF or HVO, significantly supporting prices for feedstock collectors?

This last dynamic represents arguably the most powerful structural force likely to reshape UCO market pricing over the next decade.

Conclusion: the next five years will be decisive

LThe UCO and biofuels market is entering a phase of structural transition. UCOME producers are currently bearing the greatest pressure, forced to adapt their procurement strategies in response to compressed margins. The value created downstream — in HVO and SAF — is not yet flowing back to collectors.

If UCO migrates at scale toward higher-value pathways such as SAF or HVO, collector pricing could finally find durable support. The next five years will be decisive in shaping this market for the long term.