• 2025年1月20日
  • Market: Oil Products, Biofuels & Feedstocks

Further to the expansion in animal fat coverage in Brazil, the following lower carbon intensity solution gaining interest from the market was used cooking oil (UCO). Argus launched UCO price indicators last November, aiming to bring some clarity to an informal trading market.

In this new episode, Camila Dias, Argus’ head of editorial in Latin America, and Conrado Mazzoni, deputy bureau chief of Argus in Brazil, discuss the methodology behind this price and provide a look into Brazilian UCO market export and short-term outlook.

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Transcript

CD: Hello, and welcome to another episode of the series, "The Biofuels Report," in which we discuss all exciting things biofuels!

My name is Camila Dias, I am Argus’ head of editorial in Latin America. In today's episode I will talk to Conrado Mazzoni, deputy bureau chief of Argus in Brazil. Today we will talk about the Brazilian used cooking oil market, UCO.

Welcome, Conrado.

CM: Thank you, Camila. It is a pleasure to be here and to be able to talk about this market to an international audience.

CD: To start our conversation, how did this research of the UCO market in Brazil begin?

CM: Camila, we have a long history covering biodiesel inputs in Brazil. Our indicators for beef tallow and soybean oil delivered in São Paulo completed 10 years in 2024. And it has been one year since we launched the indicator for Brazilian beef tallow fob port for export, as a result of an expansion in animal fat coverage.

This coverage is part of the Argus Brazil Motor Fuels report, which contains indicators for oil products and biofuels, such as biodiesel and ethanol, and raw materials for biofuels.

Well, this animal fat expansion process met a market demand due to the greater interest in feedstocks with a lower carbon footprint. And because of that, there was a leap in the export of Brazilian beef tallow, as Brazil became a net exporter of animal fat in recent years, tripling shipments to 250,000t in 2023 and currently reaching 300,000t from January to November 2024.

Throughout this expansion of tallow and the interest in inputs with lower carbon intensity, we met some important players in the used cooking oil UCO market, which is also considered as waste and is therefore part of the concept of circular economy. It was then that we began to deepen our research in this segment as well.

CD: We then launched the UCO price indicators on November 22nd. Tell us, what are the challenges in establishing this coverage?

CM: It's really a very challenging coverage, Camila. The UCO market in Brazil isn’t too sophisticated yet, as it is marked by informality and much price speculation.

Talking about the state of São Paulo, for example, where I live and where Argus is based in Brazil, my perception is that we have made a lot of progress in oil recovery, since there has been greater awareness and progress in recycling used cooking oil in recent years.

However, there is still a lot of informality to buy and sell this product. You have everything from small collectors to aggregators, as well as other intermediaries that prepare the specification for delivery to the biodiesel plants. So, this range of players throughout the chain ends up making the price discovery process difficult.

In Brazil, UCO is an alternative input to soybean oil for biodiesel production. In January-November of 2024, soybean oil represented 70pc of biodiesel feedstocks. Beef tallow represented another 8pc, with UCO accounting for 2pc, or around 95,000 cubic meters.

Our focus is to assess the price from its origin to the end user - that is, the biodiesel plant - avoiding information from intermediaries in the middle of the chain.

CD: So it was pretty difficult to standardize a methodology…

CM: Exactly, Camila. And this becomes even more complex when you consider the taxation of UCO in Brazil. There are state and federal taxes that apply to this product and directly influence its pricing at the end. But Brazil has a tax principle of relieving the burden on production, in the primary sector, transferring the collection of taxes to the industrial stage of biodiesel production. And then there are tax exemptions and differences in treatment that can change from state to state.

As a result, the methodology of our indicator considers the price in the state of São Paulo fob without taxes. We were successful in obtaining this type of information because we spoke with UCO originators and biodiesel plants.

Argus publishes two indicators: one with a maximum ffa (or free fatty acid) of 3.5pc and the other with a maximum ffa of 5pc. Both consider UCOs with a maximum of moisture and impurities up to 1.5pc. Sources usually call that the biodiesel standard.

CD: Conrado, how does the Brazilian UCO market look at exports?

CM: Here we have another issue: it is difficult to track what has actually been exported as Brazilian UCO, since the export codes (NCM) are unreliable in terms of mixing other products with UCO. So, we cannot have an accurate idea how UCO is exported from Brazil.

But the export codes for mixed animal fats show an increase in demand for these feedstocks for export, in addition to beef tallow, which continued to grow, despite a slowdown in the final stretch of 2024. This flow of mixed fats could have a portion of UCO, according to market participants.

In any case, the Brazilian Ministry of Agriculture has reached an agreement with the US government in June 2024 to accept the Ministry's International Sanitary Certificate, which meets US requirements. There was initially a lot of interest, but Brazilian UCO suppliers were faced with the need to prove the traceability of the origin of the vegetable oil residue. For now, as far as we know, there are two companies in Paraná state in the inspection phase to obtain this certificate.

So, the export of Brazilian UCO is a matter of certification, price and logistics, since we are talking about smaller volumes, stored in isotanks. If at some point, the prices abroad justify the economics of seeking certification, domestic players will certainly have more incentives to plan for this flow, also looking to expand UCO collection sources.

CD: What is the outlook for this market in 2025 and beyond?

CM: In general terms, Camila, if we think about the size of the Brazilian population, there is still great potential for the recovery of vegetable oil, especially in regions of the country outside metropolitan areas that have an even more incipient UCO market.

On the government side, there is an initiative that seeks to encourage recycling in Brazil. Basically, companies could receive tax benefits if they support recycling projects, which includes vegetable oil residue. So, this is a measure that may help the sector.

Furthermore, the Brazilian National Energy Policy Council CNPE established in December that it is in the interest of the national energy policy to set minimum targets for the use of waste oils and fats in the production of biodiesel, SAF and renewable diesel.

There are no further details yet on how this will be outlined, but this is a major demand from UCO suppliers, who seek the prize for the lower carbon intensity of UCO. Brazil's National Biofuels Policy, Renovabio, already recognizes the higher environmental energy efficiency score of UCO in biodiesel production, but it is still a limited effect in the current market scenario.

And, well, this kind of initiative is in line with the trend of tax incentives abroad, such as in the US, to reward the lowest carbon footprint in the life cycle analysis of biofuel production.

CD: On our side, we will continue to monitor the evolution of this market in Brazil and for exports, also in our UCO price coverage on Argus Brazil Motor Fuels report.

Conrado, thank you very much.

And thank you for listening, if you enjoyed this podcast, please be sure to tune in for other episodes in our series "The Biofuels Report."

For more information on Argus biofuels coverage, please visit our Oil products commodity page. See you next time.