Ping An Securities: The export dilemma of biodiesel is expected to be reversed, with ample domestic demand space.

Ping An Securities released a research report stating that the EU, the United States, Indonesia, and other countries have issued relevant policies to promote the increase in the blending ratio of biodiesel in road transport, marine fuel, and even aviation fuel, and global biodiesel consumption is expected to continue to grow. China mainly focuses on exporting biodiesel and used cooking oil (UCO). Currently, only Shanghai implements a B5 policy domestically, with large potential for future market penetration. With the resolution of negative news such as ISCC raw material review, EU anti-evasion review + imposition of anti-dumping duties, the export market is expected to gradually reverse from its predicament. The elimination of illegal production capacity is also conducive to optimizing the supply structure. Additionally, according to the production capacity planning, China's second-generation biodiesel HVO/SAF will usher in a peak period of production capacity release, with demand for used cooking oil fats UCO potentially exceeding domestic supply, leading to a gradual shift from export to domestic use. The main points of Ping An Securities are as follows: Biodiesel: Policy stimulus releases demand, China's export negative factors gradually dissipate Under the promotion of policies in multiple countries, global biodiesel consumption has shown a year-on-year growth trend. According to Wind data, the compound annual growth rate of global biodiesel consumption from 2010 to 2023 is 9.8%. Biodiesel consumption is concentrated in the EU, the US, Indonesia, Brazil, and other regions. According to IFIND data, by 2024, these four regions will account for 28.3%, 26.7%, 20.3%, and 11.4% of global bio-diesel consumption, respectively. EU: According to the Renewable Energy Directive III requirements, by 2030, the proportion of advanced biofuels and non-biological renewable fuels in final transport energy consumption in the EU must reach 5.5%. Referring to USDA data, assuming that the bio-diesel blending ratio in EU transport increases from 7.7% in 2025 to 9.9% in 2030, and the proportion of advanced bio-diesel increases from 3.4% to 5.6%, the compound annual growth rate of bio-diesel consumption in transportation from 2025 to 2030 is estimated to be about 4.6%. With the gradual penetration of second-generation biodiesel HVO and SAF in marine fuel and aviation fuel, the EU's biodiesel supply and demand gap is expected to expand again, leading to an increase in demand for China's HVO and SAF. China: The consumption of biodiesel in China is still at a relatively low level, with only Shanghai implementing a B5 policy. The biodiesel consumption in China is mainly for export. According to IFIND data, by 2024, China's biodiesel production and consumption were 3.035 million tons and 867,000 tons, respectively. Biodiesel consumption accounts for only about 0.7% of the total diesel consumption in transportation (according to Jinlianchuang). Assuming nationwide promotion of B5, this corresponds to a market space of over 6 million tons; in terms of exports, due to ISCC raw material reviews, EU anti-evasion reviews, and the imposition of anti-dumping duties, in 2024, the largest importer, the Netherlands, reduced its imports of Chinese biodiesel by 54.9% to 683,000 tons. Currently, all rulings have been finalized, biodiesel prices have stabilized, and after the illegal production capacity is cleared, the industry's supply structure is expected to improve, with concentration gradually increasing. Used Cooking Oil Fats: Expansion of second-generation biodiesel production stimulates domestic demand, structure may gradually shift from export to domestic use The main raw material for biodiesel in China is used cooking oil fats UCO. According to the China Biodiesel Industry Association, theoretically, China's annual UCO production capacity exceeds 8 million tons, with actual UCO collection and processing volume around 5.4 million tons in 2024. In terms of exports, according to Wind data, China's UCO export volume reached 2.95 million tons in 2024, a year-on-year increase of 43.49%, with most going to the United States, Singapore, the Netherlands, and Spain; domestically, according to USDA forecasts, in 2024, the amount of UCO used for producing first-generation biodiesel FAME in China is about 189.7 million liters, and the amount used for producing second-generation biodiesel HVO is about 89 million liters, equivalent to a total of about 2.45 million tons of UCO. Since December 2024, China has canceled the export tax refund for UCO (13%). Based on a 2024 UCO export unit price of $897 per ton, UCO exporters will lose a refund profit of $117 per ton. More UCO raw materials are expected to stay in the domestic market in the future, further supporting the production of domestic second-generation biodiesel HVO and the penetration of sustainable aviation fuel SAF. According to the current planning for the production capacity of second-generation biodiesel HVO/SAF in China (according to statistics, China is expected to put into operation about 3.48 million tons per year of SAF capacity under the HEFA process from 2025 to 2027), domestic UCO supply may become tight. Under this expectation, the bank believes that the cancellation of the export tax refund has to some extent advanced the guarantee of domestic raw material supply, promoting the acceleration of domestic used cooking oil and grease waste treatment capacity.