Domestic biodiesel demand is expected to increase
Guosen Securities recently released a review of biodiesel industry, and analyzed that the domestic demand for biodiesel is expected to increase after the pilot application of biodiesel.
The following is a summary of the research report:
On April 2, 2024, the Comprehensive Department of National Energy Administration publicized the pilot project of domestic biodiesel promotion and application.
Guoxin Chemical’s viewpoint:
1) Promoting the application of biodiesel in China is helpful for recycling waste and accelerating the green and low-carbon energy transformation. Biodiesel is a kind of renewable energy produced from waste oil and other biomass, and it is an internationally recognized green and clean fuel. In September 2023, the National Energy Administration organized an on-site meeting on the pilot project of biodiesel promotion and application in Shanghai; In November 2023, the National Energy Administration issued the Notice of the National Energy Administration on Organizing the Pilot Demonstration of Biodiesel Popularization and Application, and organized the pilot application and review of biodiesel popularization and application; In April, 2024, the National Energy Administration announced 22 pilot projects for the popularization and application of biodiesel, including 19 cities/districts, as well as China Ship Fuel Co., Ltd., China Petrochemical Fuel Oil Sales Co., Ltd. and Shandong Expressway Group.
2) The content of the pilot demonstration is diverse, which accumulates experience for continuing to expand the popularization and application of biodiesel in China. Biodiesel pilot demonstration includes vehicle biodiesel, marine biodiesel and others. The pilot demonstration of vehicle biodiesel includes regional popularization and application, industry popularization and application, enterprise popularization and application, and expressway popularization and application; The pilot demonstration of marine biodiesel includes the promotion and application of bonded areas and free trade zones, and the promotion and application of rivers and lakes. Governments and enterprises at all levels have further expanded the application scenarios of biodiesel in China by carrying out pilot demonstrations on the promotion and application of various types of biodiesel, and accumulated experience for continuing to expand the promotion and application of green liquid fuels such as biodiesel.
3) In 2023, the EU initiated the review of biodiesel for many times. In 2023, domestic biodiesel production declined and exports were under pressure. In April 2023, ISCC initiated the review of biodiesel certification enterprises in China; In August, 2023, the European Commission launched an anti-circumvention investigation on biodiesel originating in Indonesia and exported to Europe via China and Britain. On December 20th, 2023, the European Commission initiated an anti-dumping investigation on biodiesel products originating in China, and it is expected that a preliminary ruling will be made 7-8 months after the case is filed. According to Zhuo Chuang Information, the domestic biodiesel production in 2023 was 857,000 tons, down 33.5% year-on-year; Exports were 1.95 million tons, up 8.7% year-on-year, of which 1.867 million tons were exported to European countries, accounting for 95.7%, but 775,000 tons were exported in the second half of the year, down 34.0% from the first half.
4) Domestic pilot application will help boost domestic demand for biodiesel, so we need to pay attention to the specific implementation of the government and enterprises in the future. From the government’s point of view, it is an effective way to help realize the goal of "double carbon" to carry out pilot demonstration of biodiesel popularization and application; From the enterprise’s point of view, it is imperative to actively expand the domestic demand for biodiesel in the current situation of weak export demand and price to the EU. From the price point of view, the current domestic biodiesel price is 6800-7000 yuan/ton, while the current market price of 0# diesel is 7700-7800 yuan/ton (including tax), so biodiesel is more cost-effective in the short term. However, according to the promotion and application of B5 biodiesel in Shanghai, in the fourth quarter of 2023, the Shanghai Development and Reform Commission arranged a subsidy fund of 41.86 million yuan for biodiesel production from kitchen waste oil. We expect that the subsidy amount per ton of biodiesel will be around 1000 yuan. Although the prices of biodiesel and diesel oil are upside down at present, the prices of refined oil are relatively high, and the profitability of biodiesel is limited. Therefore, it is still necessary to pay attention to the specific implementation of biodiesel promotion by the government and enterprises in the future.
5) Investment suggestion: It is suggested to pay attention to Zhuoyue Xinneng, the leader of domestic biodiesel industry. At present, the company’s biodiesel production capacity is 500,000 tons, and the bio-based materials production capacity is 90,000 tons.
Risk warning: the risk of a sharp drop in the price of biodiesel, the risk that the demand for biodiesel in the EU is less than expected, and the risk of changes in biodiesel policies in the EU and China. (Guosen Securities Yang Lin, Xue Cong)
[Editor: Xiao Jie]