A fascinating transformation is sweeping through the palm oil market, where the voracious appetite of the sustainable aviation fuel (SAF) and HVO industries is turning a once-undesirable raw material into a high-demand asset. This September, high-FFA Crude Palm Oil, long considered a flaw by food refiners, is being actively sought after as its valuable by-product, PFAD, becomes a critical component in the global energy transition.

Identifying these emerging value streams is what separates leaders from followers. At Tradeasia International, our global network is tuned to these subtle shifts, allowing us to source and supply oleochemicals by seeing the future value in today's raw materials, not just their historical price.

The New Math of Biofuel Yields

The logic behind this market inversion is rooted in refining mathematics. PFAD, which is certified as a waste/residue feedstock by bodies like the ISCC, has a yield that is directly proportional to the FFA content of its raw CPO. For example, CPO with a 5% FFA level produces a PFAD yield of around 4.5%, while standard-grade CPO at 3.5% FFA yields only 3.1%. With the green energy sector’s demand for PFAD now exceeding 90,000 tons per month, biorefineries are incentivizing refiners to maximize this specific output.

From Market Discount to Strategic Asset

This new demand has radically altered the value of the raw material itself. The price discount for high-FFA CPO has collapsed to a historic low of just $30/MT below the benchmark CPO price—a stark contrast to the $60/MT discount seen just 18 months ago. The premium value of the derivative is pulling up the price of its parent material. As noted by analysts at Oleochemicals Asia, this has created a specialized supply chain where refiners are now paying more for high-FFA CPO to capitalize on the $45-$55/MT premium that biofuel-grade PFAD commands. The ugly duckling has become the golden goose, proving that in today’s evolving market, value is defined by final application, not old assumptions.

Sources:

  1. Biofuel Feedstock Market Analysis - OleochemicalsAsia.com

  2. Argus Biofuels Market Insights - Argus Media

  3. ISCC System for Sustainable Feedstocks - ISCC