- In April 2024, China's National Energy Administration (NEA) announced biodiesel pilot projects for promoting its use. Out of the 22 approved projects, 19 are led by local governments and only 3 by enterprises. Detailed pilot plans are yet to be revealed.
- Marine biofuel, particularly B24, is expected to lead in extensive promotion. To support the use of biodiesel in the automotive sector, more refined rules and policies are required. In 2022, Sinopec Fuel Oil and China Marine Bunker (PetroChina) Co. (Chimbusco), both engaged in biodiesel pilot program, reported marine fuel bunkering volumes of 19.79 million and 17.79 million tonnes, respectively. This indicates a potential demand for approximately 9 million tonnes of B24 biodiesel.
- Over 90% of China's biodiesel output is exported to Europe, where higher prices are offered. As a result of the EU's anti-dumping investigations, China's biodiesel exports plunged by almost 50% YoY in January-February. This highlights the urgent need to expand the domestic market for biodiesel applications.
- Biodiesel price has been consistently lower than 0# diesel since November 2023, creating favorable conditions for its widespread use in China. However, due to stable domestic prices for feedstocks like gutter oil and waste cooking oil, the profit margins for biodiesel producers are limited.
Pilot projects distribute in regions with high capacity
The current pilot projects for biodiesel promotion are primarily distributed on China's eastern coast regions, with a limited number in central and midwestern areas such as Hubei, Sichuan, and Chongqing. These selected areas boast major biodiesel producers and abundant feedstock of waste oil.
All of the three enterprises included in this pilot program - Chimbusco, Sinopec Fuel Oil Co. and Shandong High-Speed Group - are state owned. The first two, which are centrally administered, have experience in promoting biodiesel applications. Shandong Hi-Speed Group's subsidiary, SHREG, is a key exporter of used cooking oil (UCO) in China. Its biodiesel application scenarios remain unclear.
Additionally, the four A-share listed biodiesel producers in China are likely to participate in the pilot program. Zhuoyue New Energy and Haixin Energy Technology have announced their involvement in regional pilot projects. Jia'ao Environmental Protection is a preferred supplier for Chimbusco.
Source: Compiled by GL Consulting based on public information;
Note: Manufacturers highlighted in orange are engaged in regional pilot projects.
Marine B24 to lead widespread promotion
Considering the explorations of pilot companies and other enterprises, B24 marine biofuel is expected to be the first to achieve large-scale promotion. Starting in 2023, ports including Guangzhou, Zhoushan, and Dalian began regular B24 marine biofuel refueling operations. Analysis of 2022 bunkering volumes from pilot companies Sinopec Fuel Oil and Chimbusco, which were 19.79 million and 17.79 million tonnes respectively, suggests that the demand for biodiesel could reach 9 million tonnes with the widespread implementation of the B24 standard.
In the automotive sector, biodiesel applications involve multiple stakeholders and requires refined rules and supporting policies. Considering China's annual diesel consumption of 150 million tonnes, national usage of B5 biodiesel would necessitate 7.5 million tonnes of biodiesel.
Despite China's current biodiesel production capacity of 4.6 million tonnes/year, fluctuations in raw material supply lead to an actual output lower than this capacity, causing a shortage in domestic biodiesel supply.
Biodiesel export price halved from peak level
Due to higher premiums in overseas markets compared to the domestic market, over 90% of China's biodiesel production is exported to Europe. In 2022, the average export price of biodiesel reached as high as US$1,800 /tonne, equivalent to approximately 12,500 yuan/tonne.
However, the EU's anti-dumping probe into biodiesel, coupled with sluggish European demand, has led to a steep drop in China's export orders and persistently falling prices, which posed substantial challenges to producers. As of February 2024, the average export price of biodiesel has plummeted by nearly 50% from its peak in 2022.
In November 2023, China initiated biodiesel promotion in the domestic market in response to export uncertainties. However, the prices of domestic raw materials such as gutter oil and waste cooking oil have remained firm over 5,100/tonne (including tax), while the domestic market price of biodiesel has not exceeded 7,600 yuan/tonne since 2024. Profit margins for domestic sales are slim, necessitating immediate support from the government.
Source: China Customs, GL Consulting
Source: OilChem, GL Consulting
Source: OilChem, GL Consulting
[Link]
The notification issued by the NEA regarding the pilot projects for biodiesel promotion and applications:
https://mp.weixin.qq.com/s/9gPsKscoovb0ZMzLxbxj7Q
To get detailed full text, send an email to glconsulting@mysteel.com
Edited by Jade Yu: yujiajun@mysteel.com
