According to Zhitong Finance APP, China Merchants has released a Research Report stating that the use of SAF in refueling is a key measure for the Aviation industry's Eco-friendly Concept and emissions reduction. The EU and other regions have proposed mandatory blending ratios for SAF, and the successive implementation of supportive policies is expected to drive a significant increase in SAF demand, with global market demand for SAF expected to exceed 18 million tons by 2030, and China's total demand for bio-jet fuel exceeding 2.5 million tons. Furthermore, demand will drive capacity release, with SAF production projects in Europe and the USA continuing to advance, and the advantage of raw materials will aid in large-scale capacity construction in China, potentially improving the performance of related companies.

The main points from China Merchants are as follows:

The combined requirements for carbon reduction in Aviation along with policy support are likely to lead to a significant increase in bio-jet fuel demand.

The use of SAF in refueling is a key measure for the Aviation industry's Eco-friendly Concept and emissions reduction, with 65% of net zero emissions contributions expected to come from SAF by 2050. As a critical driver for the application of SAF, the EU has taken the lead in proposing mandatory blending ratios for SAF at 2%-6%-70% targets from 2025-2030-2050, while the United Kingdom, South Korea, and India have also clearly defined mandatory SAF blending ratios. China aims to achieve an application target of over 0.02 million tons in SAF consumption by 2025, and the gradual implementation of future policies will promote the expansion of SAF demand.

By 2030, global market demand for SAF is expected to exceed 18 million tons, with China's total demand for bio-jet fuel exceeding 2.5 million tons.

SAF demand has risen rapidly from less than 0.02 million tons in 2019 to 0.24 million tons in 2023, and with the implementation of mandatory blending ratio policies in regions like the EU, it is estimated that global SAF demand will exceed 18 million tons by 2030. During this period, the maturity of technology and market trends is stabilizing SAF prices, with the global SAF market expected to reach a scale of $400 to $55 billion by 2030. In China, the rapid development of the Aviation industry, the implementation of SAF consumption targets, and the future export potential of SAF products are expected to lead to a combined demand for bio-jet fuel exceeding 2.5 million tons by 2030, with the market scale anticipated to be between $3.81 and $7.52 billion.

By 2030, the global SAF production is expected to reach 23 million tons, with China planning to build / under construction SAF capacity exceeding 5 million tons.

The global SAF production experienced significant growth from 2019 to 2023, but there is still a noticeable gap in supply, accounting for only 3% of all renewable fuel production. Considering the current progress of SAF projects and the expectation of the aviation industry achieving net-zero emissions by 2050, it is predicted that SAF production will reach 23 million tons by 2030. Among these, Europe is expected to adopt the HEFA route with a capacity of 7.2 million tons by 2025, and the US federal government plans to produce 9.06 million tons of SAF annually by 2030.

Focusing on China, the total operational capacity of China’s SAF is about 0.45 million tons, with planned and under construction SAF capacity exceeding 5 million tons. Compared to the release of capacity in Europe and the USA, which may be constrained by the supply of feedstocks such as UCO, the potential available supply of raw materials for China’s SAF reaches 433.9 million tons per year, and waste oils, as the most mature SAF raw material currently, can supply the production of about 1.36 million tons of SAF.

HEFA is currently the only mature line that has achieved commercialization, with Neste holding an absolute advantage in global SAF production.

There are four main technical pathways for biojet fuel, with HEFA being the only commercially mature line at the moment, while FT and AtJ are expected to gradually move from the demonstration phase to commercial operation. Among the SAF producers, Neste currently has a production capability of up to 1 million tons of SAF, holding an absolute advantage in global SAF production; domestic companies such as Zhenhai Refining & Chemical, Beijing Haixin Energy Technology, and Junheng Biological, among others, have also begun to invest in production capacity and have obtained airworthiness certification.

Investment Suggestions

The biojet fuel industry is currently in its early stages of development, and the resonance between future policies and industry trends is expected to bring development opportunities for related companies. Attention should be paid to companies that have already made layouts in the SAF sector: Zhejiang Jiaao Enprotech Stock (603822.SH), Penyao Environmental Protection (300664.SZ), Beijing Haixin Energy Technology (300072.SZ), Longyan Zhuoyue New Energy (688196.SH), Oriental Energy (002221.SZ), and others.

Risk Warning

Changes in SAF policies in Europe and China, SAF demand falling short of expectations, slower than anticipated SAF capacity building in regions such as Europe, domestic HVO and SAF capacity deployment not meeting expectations, trade frictions, etc.