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A new report from ResourceWise identifies a strengthening commercial link between used cooking oil (UCO) and crude tall oil (CTO), driven by the escalating global demand for renewable fuel feedstocks. While these materials originate in entirely different industrial sectors—food services and forestry—their shared role in the biofuel supply chain has created a significant pricing correlation.
Crude tall oil is recovered during the kraft pulping process, primarily in softwood-based paper operations. This complex material contains fatty acids and rosin acids that are further refined into products like tall oil fatty acids (TOFA) and tall oil rosin (TOR). These derivatives serve diverse industrial applications, including coatings, adhesives, and surfactants. However, the emergence of tall oil as a feedstock for renewable diesel and naphtha—evidenced by facilities such as UPM’s Lappeenranta Biorefinery—has added a new layer of market dynamics.
According to ResourceWise’s October Pulp Mill Bio Solutions report, UCO prices now function as a barometer for tall oil value. This is because both materials compete for space in downstream renewable fuel markets. When the economics of renewable fuel production improve, driven by rising diesel prices or stronger policy incentives, producers increase their appetite for feedstocks. This competitive pressure often spills over from the UCO market into the forest-derived CTO market.
Despite this connection, the two materials are not perfectly interchangeable. Substitution is often limited by specific refinery configurations and regulatory pathways. Furthermore, tall oil maintains a distinct value chain in the chemical industry. While strong fuel demand might pull prices upward, weak industrial demand for chemical applications can act as a counterweight.
Ultimately, the value of tall oil is increasingly influenced by factors outside the traditional pulp industry. For stakeholders, monitoring UCO price movements offers vital intelligence regarding the broader feedstock environment, though the final pricing of tall oil distillates remains a complex intersection of energy policy, chemical demand, and wood-based production cycles.
Source: ResourceWise