Chinese exports of used cooking oil to the US were already in retreat well before US President Donald Trump chose them as the latest flashpoint in his trade war with Beijing.
Trump has landed on purchases of cooking oil as a possible weapon to counter China’s refusal to buy US soybeans. Used cooking oil is a feedstock commonly employed to make biofuels. However, soybeans remain a much more valuable commodity, and it is unlikely that ending the US-China trade in used cooking oil would have a dramatic impact on buyers or sellers.
Having hit a record 1.27 million tonnes — worth US$1.2 billion — last year, Chinese sales of processed edible oils to the US, mainly used cooking oil, have plunged this year after Beijing scrapped tax relief on exports. Over the first seven months, sales were 387,000 tonnes versus 684,000 tonnes in the same period last year, US Department of Agriculture data showed.
Photo: AFP
By comparison, Chinese soybean purchases from the US last year totaled about US$12.6 billion. Still, the US was China’s top destination for used cooking oil last year, accounting for about 43 percent of its exports, the US department said.
Chinese shipments to the US have fallen, with some redirected to the EU and others to domestic producers of sustainable aviation fuel, said Dan Mackay, an analyst in Singapore at price reporting agency Quantum Commodity Intelligence.
Waning demand from the US has already been priced in by the market, he said, adding that export offers for Chinese used cooking oil cargoes are unchanged since Trump’s post threatening to end the trade.
China’s exports of unused cooking oil to the US began to surge in 2023, as US biofuel producers snapped up cheap supplies to capitalize on the green incentives of former US president Joe Biden’s administration. The increase also followed a probe by the EU into Chinese shipments after local competitors complained about artificially low prices.
That backlash spread to the US, where the biggest soybean processors accused China of undercutting US crops used for biofuels. Beijing’s removal of tax breaks on overseas sales of used cooking oil on Dec. 1 last year further shrank its appeal as an export.
It means the direct impact of a ban on China and the US would be limited. Chinese traders could see “short-term pressure as they redirect volumes to Europe or deal with weaker prices and higher inventories,” said Kang Wei Cheang, an agricultural broker at StoneX Group Inc in Singapore.
In the US, the supply of low-carbon feedstock could tighten, he said.
Soybean oil futures on the Chicago Board of Trade did respond positively to Trump’s threat, adding as much as 1.7 percent before paring gains.
Overseas markets for other vegetable oils, including palm oil from Southeast Asia, are also likely to come under some pressure from the US president’s protectionist tilt.
Futures in Kuala Lumpur dropped as much as 0.6 percent before recovering most of those losses.
“It is bearish on palm oil, but bullish for local US soybean oil,” said Rajesh Modi, a trader at Sprint Exim Pte in Singapore.
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