By Chen Aizhu and Trixie Yap

SINGAPORE (Reuters) -China’s used cooking oil (UCO) exports to the United States, its largest buyer, are set to plunge in coming months due to steep tariffs, forcing sellers to divert shipments to Europe and elsewhere, industry players said.

With Trump administration is now charging 125% import tariff on Chinese UCO from this month. Shipments to the U.S., valued at $1.1 billion last year, are tumbling with the last cargoes sailing around late March and early April before trade grinds to a halt, said three China-based UCO traders.

China’s UCO exports hit an all-time high last year at nearly 3 million metric tons or worth $2.64 billion, according to Chinese customs.

"For the time being, arbitrage to the U.S. is closed and we think it will remain so for the medium term," said Richard Dickinson, Shanghai-based head of trading Amarus Trading, one of the largest dealers of Chinese UCO.

"Some of the exports will be diverted to Europe and new markets in Asia such as Korea, Thailand, Malaysia and India."

At least four new Sustainable Aviation Fuel facilities, which use UCO as an ingredient and totalling at least 700,000 metric tons per year of production capacity, have started up or will begin operation by this year in Thailand, Malaysia and Japan, according to industry insiders.

Exports to the U.S. have fallen since last December as Beijing removed tax rebates for UCO exports and also due to the new U.S. clean fuel tax policy that discourages the use of imported UCO, and the latest tariffs only exacerbates the situation, a shipper of the fuel said.