John: Hello, and welcome to the "Weight of Freight" podcast, where we explore the powerful connections between the freight and commodities markets. Today, we're going to talk about the Asian biofuels freight market, where rates have tumbled throughout 2025 and hit the lowest levels for years. Joining me today is Leonard Fisher-Matthews, lead reporter for Argus' newly launched specialized freight publication, that we'll be covering this as well as a range of other topics from this May. Welcome, Leonard.
Leonard: Hi, John. Good to talk to you.
John: Right. Let's start at the beginning. Can you just remind us of the types of vessels and products that we're talking about here, as there's a lot of crossover in this market, and specialized has become somewhat of an umbrella term?
Leonard: Yeah, exactly. We do see quite a few different types of vessels, and lots of different specialized products are exported from across the Asia Pacific. So, it's good to sort of break it down a bit. The way I like to think about it is we have stainless steel segments, and mostly here, we're looking at what people call J19s, which is your, usually, 21,000 deadweight ton stainless steel tankers. And these are considered to be on the smaller end or long-haul voyages. After this, we then have a collection of handy-sized and medium-range tankers. These are often coated, and they have IMO ratings.
At Argus, we like to look at the medium range, the MR tankers, and we like to look at IMO 2 MRs. IMO 2 has a higher spec than, say IMO 3. They usually have smaller tanks and better coatings or more stringent coatings, and allows them to take harsher products, particularly products like UCO or UCOME and other biofuels. Then we have IMO 3 MR. These tend to have larger tanks and slightly different coating, and they can take less harsh products such as palm oil or HVO or vegetable oils.
And then, sitting in between these two classes, we have the IMO 2/3 medium-range tankers. And these can take IMO 3 products, and they could also take IMO 2 products, but usually at lower quantities. So, their tanks will be less full with them. So, altogether we have our stainless steel J19s, our IMO 2 MRs, our IMO 2/3 MRs, and our IMO 3 MRs. And this makes up the bulk of the specialized tanker segment.
Now, these vessels move all sorts of products from Asia Pacific. The way I like to break it down is we have veg oils and our renewable fuel feedstocks. This covers products like palm oil, used cooking oil, and Pomi oil. These products are often used to be processed into biofuels. Then we have our biofuels themselves, and we tend to look at UCOME, which is a fame, HVO, which is hydrated vegetable oil, and SAT, sustainable aviation fuel.
Then, outside of the biofuels and feedstocks world, we have some chemicals. Mostly here we're looking at sulfuric acids and aromatics, and also, some caustic soda. And these are the products that most of our fleet will be looking at, aside from, and importantly, the clean product market. Obviously, you have clean product vessels, which tend to move gasoline and diesel and jet, but this is a very liquid and reliable market, more liquid than the biofuels market, of course, in the Asia Pacific. So, our specialized tankers will often dip into the clean market where necessary to secure more reliable revenues and essentially get into a more liquid market.
So, we have four quite important different vessel types here, and a range of different products, and there is a vast degree of crossover between these vessels and products. So, when we look at our stainless steel tankers, they might often be moving chemicals and harsher products because they have the spec to do so, but they will also often move other products like palm oil and clean products when necessary or when there's more cargoes available in that market.
John: Interesting. And how about our key long-haul voyages? Where are all these products heading?
Leonard: Yeah. So, if we start with palm oil, most palm oil is heading to your big neighboring economy. So, most of it is heading to China and India, and some is coming to Europe, mostly to the Netherlands, and also, some to Spain. This almost entirely, all of it originates from Indonesia and Malaysia, which are the two largest exporters in the region and producers of palm oil.
Then if we're looking at biofuels and feedstocks, vast majority of these products are heading to Europe and the U.S., which have, you know, the most stringent mandates in place and the highest demand for biofuels and the feedstocks to process into biofuels. This is changing somewhat now, but we'll get into that later. And then, when we look at the chemicals, it's a bit of a mixed bag. So, aromatics are heading from mostly South Korea to the U.S. Gulf Coast and to a lesser extent, Taiwan. And then sulfuric acid is heading from Northeast Asia, so China, Japan, to India and Chile, and some other countries around the world.
John: Interesting. You've mentioned palm oil a couple of times there. Across the product spectrum, what products move in the largest volumes?
Leonard: Yeah. So, this is where things get slightly complicated, but it's very important to point out. So, palm oil, by large, is the most liquid product and the most liquid market across these products that we've mentioned. It's exported in much higher volumes than say, biofuels or chemicals, and it's mostly moved, or it can be moved by IMO 3 tankers. So, it doesn't always require a higher spec tanker like an IMO 2, MR, or a stainless steel J19. However, often, it will be moved by these vessels as well, particularly when as a part cargo. So, when we see 5KT or 10KT or something like this, it's usually going to be parceled in a high-spec cargo like an IMO 2 or J19.
And these palm oil exports, as we mentioned, will be heading to China and India and Europe, and also, to the U.S. And they really build up the basis of the specialized tanker market, as it's basically, it's the most liquid. Other than this, I'd say the next most liquid product category in the market will be your renewable feedstock, which is used cooking oil, UCOME oil, and tallow, and products like this. There's a simple logic here, which is, your feedstocks and your veg oils are going to move in larger volumes than your finished biofuels products because your biofuels products have been refined and processed into smaller volumes.
John: Okay. So, moving more into current affairs at the moment, let's look at vegetable oils and renewable fuel feedstocks specifically here. We've seen a lot of things happening in the news lately. What has been happening, and how has this affected the specialized tanker market?
Leonard: Yeah. So, first and foremost, it's important to note that our freight rates across many of our different vessel types are at their lowest point in 2025 and some of them the lowest point in years. As we've mentioned crucially, we're looking at palm oil exports and how this has impacted the market vastly. Overall, palm oil exports from Indonesia and Malaysia have been low in 2025. This is partly to do with higher prices, and our key importers like India, Pakistan, and China have actually been importing more soybean oil from Argentina, and actually, during some of the tariff issues in the U.S., more canola oil from Canada. And this has sort of muscled out some of the palm oil imports to these regions.
There was a bump in palm oil exports in March, and this was partly because Indonesia was transitioning to a B40 mandate, and this was to happen at the end of February, beginning of March. And this process led many in the market to expect a higher palm oil export tax was coming in March, potentially, alongside concerns of, you know, how this new mandate would impact domestically in Indonesia to service this higher biofuels mandate, which is blended into their fuel supply. This prompted some more buying in March alongside more buying ahead of any tariff announcements in the U.S. and any shake-up to global pricing landscapes.
Aside from this bump in March, exports of palm oil have been low in 2025. And in April, we saw the lowest export level since May 2022, and there was about a 20% drop on exports between March and April. And so, you can see such a considerable drop in exports is going to lead to much fewer cargoes available to our specialised tanker segment, particularly for part cargo space on your coated MRs and your J19s. And this has led, overall, to falling freight rates across Southeast Asia.
John: What about on the biofuel side? All the exports from China and Southeast Asia, has that made up for these cargo losses?
Leonard: Yeah, so in terms of biofuels and your biofuels feedstocks like used cooking oil, historically, exports of UCO from China to the U.S. was one of the foremost markets for IMO 2 coated MRs and IMO 2/3 coated MRs. I think in 2024, you'd generally see about 100 to 200,000 tons moving from China to the U.S. per month. At the beginning of 2025, this flow was slashed because the U.S. transitioned to a different biofuels tax credit scheme. So, previously blenders would receive tax credits for blending biofuels into fuels. This moved to the 45Z tax credit scheme, which provided tax credits to producers of biofuels. Also, as part of this policy, it no longer accepted certain foreign feedstocks from being used to produce biofuels, which would gain credits. And importantly, one of these was Chinese UCO. A clear result of this was throughout 2025, exports of UCO from China to U.S. have been way lower and dwindling.
So, as of April, this flow of Chinese UCO to the U.S. is virtually non-existent. The U.S. and China have both ramped up tariffs on one another to over 100% on many goods, including UCO from China to the U.S. So, what was a key trade in 2024 was already dwindling in 2025, weighing on demand for specialised tankers in Northeast Asia, and now, has virtually completely stopped, which has left many vessels without cargoes which they would have previously had in previous months and last year.
Now, there has been higher exports of UCO to Europe, particularly in January and March. This was partly supported by prices in Europe, and also, because Chinese UCO had to go somewhere, so it was being redirected to Europe. But this has since died down. It seems that the European market is mostly satisfied now because there is only so much it can take. Now, it's the same situation when we look at Chinese biofuels' exports. There was a jump to Europe in March, as this is UCOME, and the UCOME demand was there. But again, this has since fallen off as it seems that the market is mostly satisfied.
When we come down to Southeast Asia and we look at biofuels there, Southeast Asian exports of biofuels to the U.S. have dwindled on the same 45Z policy. So, that policy, the tax credit scheme, has also...because it's now providing tax credit to producers of biofuels, those that import biofuels from countries such as Singapore, Indonesia, or Malaysia are no longer going to be viable to receive the tax credits. So, that's also dramatically weighed on the flow of biofuels from Southeast Asia, as well as the flow of U.S. cooking oil from China.
In addition, we have the base rate 10% tariffs which are applied to some of these products. There is speculation around whether certain products like SAF or HVO could be passed into the U.S. under different HS codes, and they may be able to avert some of the tariffs. But this is still being interpreted and understood by the markets. But ultimately, it's the 45Z policy which has heavily weighed on flows of biofuels from Southeast Asia to the U.S. And again, more has been directed to European markets, particularly HVO and SAF from Singapore's Neste site. A lot of this has gone to Europe instead. But, and this is the important thing, when it comes to the specialized tanker market and demand for specialized tankers, a slight uptick in UCO and bios heading to Europe and leaving Southeast Asia is heavily outweighed by the loss of UCO and biofuels exports from China and the loss of palm oil exports from Southeast Asia.
So, if we look at the difference between March and April, and I'm looking at data compiled from Kepler here, we can see that between March and April, exports of U.S. cooking oil and biofuels from China were down about 230,000 tons. Exports of palm oil from Southeast Asia were down about 500,000 tons, while exports of used cooking oil and biofuels from Southeast Asia were up about 2,000 tons. So, it's quite clear that we're seeing a huge loss in cargo numbers and demand for specialized tankers across the Asia Pacific.
John: Interesting. So, biofuels and feedstocks export levels have waned, and the loss of the China-U.S. trade is key there to driving down demand. What about the chemicals trade? Has there been much support from there?
Leonard: Yes. So, in terms of sulfuric acid exports from Northeast Asia to India and Chile, this flow has lengths of support, particularly to the stainless steel J19 segment, as long-haul voyages have remained fairly strong. But this has been offset by falling regional demand, and this is the knock-on consequences of U.S. tariffs and Chinese tariffs, and a general slowing in global trade. Now, U.S. tariffs on Chinese products has weighed heavily on Chinese exports of textiles and manufactured products and plastics. This means, at the manufacturing facilities in China, there is a much lower requirement for aromatics. And as a knock-on consequence, this means there is a much lower requirement for our stainless steel vessels and specialized tankers, which move aromatics from South Korea to China and across the region.
So, we have seen a bump up in demand for sulfuric acid exports from Northeast Asia, but this has been mostly offset by a lack of activity regionally, based on slowing trade. Similarly, exports of aromatics from South Korea to the U.S. Gulf Coast have also dropped substantially since March, largely on U.S. tariffs and also, reasonably high inventories in the U.S. Gulf Coast, which have come from high imports from different regions across the world. So, we're also seeing a vast drop in demand for specialized tankers in South Korea moving aromatics to the U.S., and also, aromatics to China.
John: Fascinating. Well, we're almost out of time here. So, Leonard, to finish us up, as the lead reporter on Argus' news specialized freight publication, what do you see as the most important issue for specialized freight moving forward?
Leonard: So, I think one important thing that we have to note before we wind down here is the clean product freight market. Revenues are pretty low. They're about one-third of where they were last year, this time last year, and this provides fewer alternatives for specialized tankers looking for a more reliable market to dip into. So, this is providing very little support to the specialized tanker market. There's also many concerns of just a broad economic slowdown in key economies like China and India and U.S. as the barriers to global trade are quite high at the moment, which is inevitably going to weigh on demand across freight markets and particularly, the specialized tanker market.
One other thing that's worth noting is we're seeing quite high growth in the fleet size, and there's a lot of new builds that have come into the market in 2024 and 2025, and there's a lot of new builds on order before 2027. I think the thing to look out for, which many people are aware of, is the end of the U.S.'s pause on tariffs, and this comes at the beginning of July, July the 8th. There will be big decisions made on this date. Will higher tariffs be reinstated? Will it stay at a lower rate to many countries? And this, of course, will impact the specialized tanker market. I think to sum up at the moment, ultimately, the loss of the U.S. as an export destination to Chinese UCO, and broadly for biofuels across Asia Pacific, alongside a weaker and a slower palm oil market and a slower clean product market has just waned on demand for specialized tankers and has pushed rates down.
John: Right, that's all we have time for today. First, I'd like to thank our guest, Leonard, and thank you, everyone else, for listening.
If you would like further insights into the biofuels freight market, both for Asian origin routes, as well as Europe and the Americas, then please see the new Argus Specialized Freight publication released this May. We hope to see you again soon in the next "Weight of Freight" podcast. Goodbye.
