Used Cooking Oil collection: a market worth 470 million euros, with France representing only 5%
The market of Used Cooking Oil (UCO) collection is relatively young, however, with high growth potential and very positive outlook. The oil used in the food industry (restaurants, canteens, fast-foods etc.) is then collected, cleaned and finally transformed into renewable and environmentally-friendly fuel: the UCOME biodiesel.
The European Union’s support, illustrated by the establishment of the double-counting system, shows the governments’ will and an ever-growing interest for alternative, waste-based, fuels. At the same time very few people realize that the main actors of the waste-based biofuels market are small UCO collectors whose everyday life consists of repetitive tours around local restaurants to retrieve what will later become biodiesel.
The day-to-day life of a UCO collector
We followed a UCO collector during a typical day of oil collection. They usually start at 5.30 a.m. in order to avoid traffic and finish their day before lunch, covering between 15 and 20 restaurants. From Michelin star restaurants to simple bars or fast foods, all have used cooking oil which they have to get rid of. Mainly located in cellars or basements so as not to bother the clientele, the 60, 120 or 150-liter cans are very difficult to handle, even with the goods-lifts. A job, all but obvious, physical and above all subject to market fluctuations: the drop of restaurant attendance and the volatility of the fuel price. At the end of our tour, we end up with 1800 kg of collected UCO, representing only 0,05% of the monthly need of a UCOME producer.
Collectors and the difficulties they are facing
In France there are nearly forty collectors, eight of them making more than a million euros turnover. Two big leaders, achieving 6 million euros each, hold nearly 85% of the total market shares. The rest of the sector is split between small family owned companies, their turnover reaching from 200.000 to 400.000 euros per year, or companies in sole ownership with a turnover between 70.000 and 150.000 euros per year.
The greatest difficulty in the UCO collection business is variable costs, which strongly depend on the logistics costs like fuel and tolls. Moreover the turnover is highly instable because of market fluctuations, the biodiesel/fuel prices, veg-oils quotations and exchange rates. Together with the new sustainability requirements (e.g. ISCC certification scheme), which are costly as well, the variable costs put a significant weight on the collectors’ shoulders.
As an example, in 2014 in France, two collectors went bankrupt because of the strong competition, uco price fall and the decrease in the amount of oil collected. With certification standards and norms becoming mandatory and more and more restrictive as well as significantly increasing charges, small companies struggle to make profit.
Five years ago, restaurant owners, constrained to take care of the recycling of their used oil, paid the collectors to dispose of the waste. Today, however, the situation has changed and it is the collectors who have to pay to retrieve the UCO as it is now no longer waste but highly-valued feedstock for biodiesel production. As a consequence, thefts of UCO become a more and more common phenomenon.
However, it is not theft but rather the difficulty to increase the amounts of UCO collected that weights strongly on the development of the sector. This is mainly due to a more efficient and saving-oriented consumption of oil by restaurant owners (deep fryers consuming less oil for example), a lower consumption of meat and deep fried foods but also to the crisis effects, including the sacrifice of restaurant visits at the end of the month. This decrease of restaurant attendance, as a part of the gloomy European context, amounted to 2,2% in 2012 and 1,4% in 2013, in France. Same trend in Italy for example, with -2,4% in 2012 and -2,1% in 2013.
This is strongly felt since a year and a half and opens up the question of securing the feedstock supply by increasing the imports of UCO from other continents and thus satisfying the demand for UCO which is now highly outrunning the local supply.
European support and need to open up internationally
The European Union’s support is best visible in the double-counting system favoring the collection and recycling of waste and counting it twice towards the GHG reduction target. Therefore it represents a significant economic interest for the buyer.
Since five years ago, the market price for used cooking oil has strongly increased, allowing the economic equilibrium to settle at 530 euros per ton. However, in 2014, the price trend is downward (-18% during the year, illustrating a variation of 130 euros per ton) and seriously approaching the equilibrium price. The collectors see their margin melting away, their variable costs becoming even higher.
The price fluctuation influences not only the turnover but also the liquidity of the sector. Thus, if, due to decreasing prices, all the UCO produced in a given market got collected and sold to collectors, the liquidity of the market would be at risk. As a consequence, it would mean a number of jobs lost. Even though this sector in France creates around 160 direct workplaces, it leads to indirect job creation in the transportation sector, for example, and to a reduction of costs linked to the waste treatment by the community: the non-recycling of UCO generates extremely high sanitation costs.
Therefore, in order for the biodiesel industry to run at full capacity and, at the same time, to escape the illiquidity trap and the nearly saturating collection market on the European territory, the EU should put an effort into supporting the imports coming from the USA, South America, and Asia. The imports should definitely not be seen as a threat to the sector (2% tax and big logistic constraints) but on the contrary, as an opportunity for the European biodiesel industry to use the local factories at full capacity.
By opening up to more import from outside of the EU and encouraging citizens to eco-commitment by organizing residential UCO collection systems, Europe can significantly increase its supplies. It would definitely require some development and incentives from the governments but the potential growth achieved via such measures should more than compensate the difficulties incurred in the process.