Overview
As the demand for renewable fuels in Europe continues to grow, Used Cooking Oil (UCO) has become a vital feedstock for biodiesel production. Indonesia, with its abundant UCO supply, is one of the key exporters serving this market. However, the cost structure for UCO exports is influenced by several factors, including domestic regulations, logistical expenses, and acquisition costs.
In this blog, we will provide our European buyers with a clear understanding of how UCO pricing is determined under the latest Indonesian regulations, offering insight into the costs associated with exporting UCO to Europe. We’ll also explain the current UCO acquisition costs in Indonesia and how currency fluctuations affect our pricing.
1. UCO Acquisition Cost in Indonesia
As of October 2024, the acquisition cost of UCO in Indonesia ranges between IDR 10,800 and IDR 11,500 per kilogram. Using the average exchange rate for October 2024 of USD/IDR 15,500, the acquisition cost for UCO in USD is as follows:
- Low-end price: 10,800 IDR/kg = $0.70/kg
- High-end price: 11,500 IDR/kg = $0.74/kg
This acquisition cost forms the base of our UCO pricing, and it is influenced by local market conditions, including supply availability and competition. The final export price, however, includes additional costs related to regulatory levies, compliance with domestic market obligations (DMO), and logistics.
2. Export Levy Based on CPO Price: $53.62 per Ton
Indonesia applies an export levy based on the price of Crude Palm Oil (CPO), which is currently set at $893.64 per ton. Under the KEPMEN 1330 regulation, the levy rate is 6%, which results in an additional $53.62 per ton of UCO exported. This levy is applicable until 31 October 2024, after which a new regulation or adjustment to the rate may be introduced.
This levy is part of Indonesia’s strategy to support domestic industries while allowing for the export of UCO, which is in high demand in Europe for biodiesel production. For buyers, this levy is an essential component of the total cost of acquiring UCO from Indonesia.
3. Domestic Market Obligation (DMO) and Export Rights: $20 per Ton
In addition to the export levy, UCO exporters in Indonesia are subject to the Domestic Market Obligation (DMO). This regulation ensures that local cooking oil supplies are protected by requiring UCO exporters to purchase export rightsfrom domestic cooking oil factories. The conversion factor is 1:1, meaning that for every ton of UCO exported, an equivalent ton of cooking oil export rights must be purchased.
The current market price for these export rights is $20 per ton. This adds another layer of cost to UCO exports, but it ensures compliance with Indonesian domestic supply requirements.
4. Logistical Expenses: Flexibags and Freight Charges
Transporting UCO from Indonesia to Europe involves several logistical costs, primarily related to packaging and shipping. UCO is typically shipped using Flexibags, which are large-capacity containers designed to handle liquid commodities. The cost for a Flexibag is around $450 per 20-foot container, which has a capacity of 22 tons. This translates to approximately $20.45 per ton.
Freight charges from Indonesia to Rotterdam, one of the key European hubs for biodiesel production, currently range from $2,200 to $2,800 per container. This translates to a per-ton shipping cost of approximately $100 to $127 per ton.
5. Breakdown of Costs per Ton of UCO Exported
To give you a clearer picture, here’s a breakdown of the approximate costs associated with exporting UCO from Indonesia to Europe as of October 2024:
- UCO Acquisition Cost: $700 to $740 per ton (based on IDR 10,800 to 11,500 per kg)
- Export Levy: $53.62 per ton
- DMO Export Rights: $20 per ton
- Flexibag Cost: $20.45 per ton
- Freight Charges: $100 to $127 per ton (depending on shipping rates to Rotterdam)
Total Estimated Costs per Ton of UCO:
- Low-end freight estimate: $894.07 per ton
- High-end freight estimate: $961.07 per ton
These prices are calculated based on current market conditions and regulations, but it’s important to note that they can fluctuate due to changes in the CPO price, exchange rates, and shipping costs. Additionally, any changes in regulations after 31 October 2024 may affect future pricing.
6. Understanding the Exchange Rate Impact
Currency fluctuations play a significant role in UCO pricing. The average exchange rate for October 2024 is IDR 15,500 per USD, but even small changes in the exchange rate can affect both the acquisition cost in Indonesia and the final export price. For instance, a stronger rupiah against the dollar could lead to higher acquisition costs for exporters, while a weaker rupiah might lower costs.
As an exporter, we constantly monitor exchange rate trends to provide competitive pricing while ensuring that we cover the costs associated with regulatory compliance and logistics.
Conclusion
For our European buyers, understanding the detailed cost structure of UCO exports from Indonesia is essential for long-term planning and budgeting. The final export price of UCO is influenced by several factors, including acquisition costs in Indonesia, export levies tied to CPO prices, Domestic Market Obligations, and logistical expenses such as Flexibags and shipping rates.
At PT. Tuang Bio Energi, we are committed to providing transparency in our pricing and ensuring that we meet all regulatory requirements while offering high-quality UCO for biodiesel production. By staying informed about regulatory changes and market conditions, we strive to deliver consistent and reliable service to our buyers in Europe.
We encourage you to reach out to us for any questions or to discuss long-term partnership opportunities.
Contact Tuang Bio Energi
Website: https://www.tuang.co.id
Phone: 021-30620136
Email: [email protected]
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