China approves first bonded biofuel blending pilot in Zhoushan

Alongside the approval, regulators have rolled out a dedicated supervision framework, marking a concrete step from policy experimentation toward commercial implementation.

Cost Structure Reset: ~USD 80/tonne Saving via Local Blending

The most immediate impact is a structural reduction in operating costs. According to fuel suppliers' estimates, local bonded blending is expected to reduce costs by around USD 80 per tonne compared with traditional import-based routes.

The key lies in resolving long-standing tax and invoicing constraints within bonded zones. Previously, due to limited onshore (Mainland China) blending pathways, bunkering operators often had to route blending operations via Hong Kong. With bonded-zone tax rebates now fully integrated into the process, the shift enhances not only cost efficiency but also Zhoushan's overall competitiveness as a bunkering hub.

Market Upside: From 150 kt to a Potential 4.77 Mt

Cost optimization is expected to unlock significant latent demand. China's biofuel bunkering volumes totaled just 150 kt last year, compared with 1.36 Mt in Singapore.

According to GL Consulting estimates in November 2025:

• Demand scenario: If B24 blending were widely adopted, annual biodiesel demand could theoretically reach 4.77 Mt, based on China's bonded marine fuel consumption.
• Supply reality: China's domestic biodiesel output stood at around 1.6 Mt in 2024, highlighting a substantial supply gap.
• Investment signal: Zhoushan's RMB 1.7 bn investment in a 400 kt biodiesel processing project directly targets this mismatch.

Regional Spillover: A Blueprint, With Compliance as the Bottleneck

Zhoushan's pilot sets a replicable institutional template for other ports. In GL Consulting's analytical framework, seven major ports, including Dalian, Qingdao, Shanghai, and Shenzhen, show strong follow-on potential.

That said, early-stage implementation still hinges on execution details, particularly tax declarations and bonded tank compliance standards. In the initial window, first movers that adapt fastest to the regulatory mechanics are likely to secure an advantage in the green bunkering race.

By 2026, China's green marine fuels sector is expected to shift from rule testing to commercial acceleration. However, constraints remain. Tight feedstock supply has kept biodiesel prices above RMB 8,000 per tonne for much of the year, while competition with SAF for raw materials continues to cap margins.

The above reflects our initial assessment of the evolving policy framework. A more detailed assessment examining emerging arbitrage opportunities under current cost dynamics and the rollout of detailed rules across other major ports is available in the February issue of China (Energy Transition) Policy Perspective (produced by GL Consulting).

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