First Index Trade in Used Cooking Oil

The ground-breaking trades, which are based on the daily reported pricing on PRIMA T1 NON EU UCO CIF ARA in USD per metric tonne, took place in August and October 2019, due for delivery in 2020.

The PRIMA Index calculates daily trade flows of UCO, providing real-time pricing for the product. The trades will enable both buyers and sellers to pay market price for the UCO at the time of loading.

UCO, which has been internationally traded as a feedstock for biodiesel for the last eight years, has previously been traded on a flat price basis. To date, flat pricing has limited the maturity of the UCO market as suppliers have been unable to offer the product more than two months in advance due to uncertainty around UCO price and shipping costs at the time of loading.

The new index-linked pricing from SCB sets out to change the way UCO is traded, increasing liquidity, allowing buyers to lock in production margins and sellers to lock in profit margins.

Sarah Xavier of SCB commented:

“For too long the UCO market has been hampered as producers’ and suppliers’ only option has been to agree trades on a flat price basis. This clearly has historically benefitted one party at the expense of the other, depending on movement in UCO price between [agreement] and delivery.

This alternative and highly innovative PRIMA Index UCO product will increase trade liquidity and will allow producers to trade their biodiesel, as well as benefit majors by allowing them to lock in blend stocks to meet government mandates.”

Matthew Stone, Managing Director at PRIMA, added:

“Recycling of wastes is surging in the fight to decarbonise the transport sector. UCO has become the main feedstock used by biodiesel and HVO producers to produce the low carbon intensity fuel supply growth policy-makers require post-2020. PRIMA’s Indexes track global price development and provide the foundations for this key decarbonisation industry to develop.”