Used cooking oil methyl ester premiums plunge after Germany clears certificates from suspended producer

LONDON (ICIS)–Premiums for used cooking oil methyl ester (UCOME) were under pressure following a controversial move from the German government to release previously-blocked proof of sustainability (POS) certificates from a suspended hydrotreated vegetable oil (HVO) producer.

Price impact on the spot European biodiesel market, more specifically on UCOME, materialized quickly with sharp drops over the two days since the news emerged on Tuesday.

In an official statement,  the federal office of agriculture and food (BLE) said that following an investigation, it held “a strong suspicion that the HVO producer does not exist”, but made the decision to validate the POS certificates. The tickets are used to verify the sustainability of a biofuel.

One source highlighted a significant market impact following the re-entry of the controversial tickets, adding that prices collapsed in a short span of two days.

“It killed the UCOME market,” said the market source. Spot premiums for UCOME over gasoil dropped by US$ 75/tonne week on week, to reach US$ 780-790/tonne FOB ARA. A second player agreed the market had been “quite weak” since the news came out.

A BLE press officer told ICIS on Friday the unblocking of the POS certificates takes “into account the possible protection of confidence” in line with the Biofuels Sustainability Ordinance, known in Germany as Biokraft-NachV.

Controversy emerged as market participants voiced concerns over the release of the previously suspended proof of sustainability (POS) certificates back into the market and fuelling an oversupply.

Issues began to emerge at the start of the year. The investigation also showed biofuels sustainability verification scheme ISCC suspended the user’s certification in January. The government statement, published on Tuesday, also voiced doubts over the existence of the supplier which was meant to be based in the Netherlands. The HVO producer had been using the country’s Nabisy biofuels compliance registry, but its access has been revoked.

In contrast, premiums for fatty acid methyl ester (FAME 0) and rapeseed methyl ester (RME) rose slightly this week.

The German government said the Nabisy ticket scheme user, the HVO producer, used an address in the United Arab Emirates, but during an associated audit report had given a different address in Hong Kong. The impacted Nabisy users were asked to provide a “self-declaration on compliance”.

The government statement also indicated further steps “in criminal law” were being considered.