CMSC: The production project of SAF in Europe and America continues to advance, and the advantage in raw materials will help with the large-scale capacity construction in China.

The CMSC report states that the addition of Sustainable Aviation Fuel (SAF) is the key means for the aviation industry to reduce emissions and meet environmental standards. The EU and other regions have proposed mandatory blending ratios for SAF, and the implementation of supportive policies is expected to drive a significant increase in SAF demand. It is estimated that the global market demand for SAF will exceed 18 million tons by 2030, with China's comprehensive demand for biojet fuel exceeding 2.5 million tons. In addition, demand will drive capacity release, with SAF production projects in Europe and America continuing to progress, and raw material advantages will help China establish large-scale production capacity, leading to potential performance improvements for related companies. CMSC's main points are as follows: Aviation emissions reduction requirements, combined with policy support, are expected to lead to significant growth in demand for biojet fuel. SAF blending is a key means for the aviation industry to reduce emissions, and by 2050, 65% of net zero emissions will come from SAF. Policies play a key role in promoting the use of SAF, with the EU leading the way in proposing mandatory blending ratios for SAF, aiming to increase the blending target from 2%-6%-70% between 2025-2030-2050. The UK, South Korea, India, and China have also set clear mandatory blending ratios for SAF. China has set a target to strive for a SAF consumption of over 20,000 tons by 2025, and the gradual implementation of future policies is expected to boost SAF demand. By 2030, global market demand for SAF will exceed 18 million tons, with China's comprehensive demand for biojet fuel exceeding 2.5 million tons. SAF demand has rapidly increased from less than 20,000 tons in 2019 to 240,000 tons in 2023. With the implementation of mandatory blending policies in the EU and other regions, it is estimated that global demand for SAF will exceed 18 million tons by 2030. As technology and market maturity progress, SAF prices are expected to stabilize, and the global SAF market is projected to reach $40-55 billion by 2030. For China, rapid development in the aviation industry, the implementation of SAF consumption targets, and the future potential for SAF product exports are expected to lead to a comprehensive demand for biojet fuel of over 2.5 million tons by 2030, with the market size expected to reach $3.81-7.52 billion. By 2030, global SAF production will reach 23 million tons, with China planning to have over 5 million tons of SAF production capacity. Global SAF production has experienced significant growth from 2019 to 2023, but there is still a significant supply gap, accounting for only 3% of all renewable fuels production. Combining the progress of existing SAF projects and expectations for the aviation industry to achieve net zero emissions by 2050, it is estimated that global SAF production will reach 23 million tons by 2030, with Europe producing 7.2 million tons using the HEFA route by 2025, and the US federal government planning to produce 9.06 million tons of SAF annually by 2030. Focusing on China, China's operational SAF production capacity is approximately 450,000 tons, with planned/under construction SAF production capacity exceeding 5 million tons. Compared to Europe and America where capacity release is constrained by UCO and other raw material supplies, China's potential available SAF raw material quantity is 433.9 million tons/year, with waste oils currently the most mature SAF raw material, capable of producing approximately 1.36 million tons of SAF. HEFA is currently the only mature technology pathway that has been commercialized, with Neste holding a dominant position in global SAF production. There are four main technology pathways for biojet fuel, with HEFA being the only mature commercialized pathway. FT and AtJ are expected to gradually move out of the demonstration stage and enter commercial operation. Among SAF producers, Neste currently has an operational capacity of 1 million tons of SAF, holding an absolute advantage in global SAF production; domestic companies such as Zhenhai Refinery, Beijing Haixin Energy Technology, and Jun Heng Biofuels have also begun investing in production capacity and have obtained airworthiness certification. Investment recommendations The biojet fuel industry is still in the early stages of development, and the resonance of future policies and industry trends is expected to bring development opportunities to related companies. Focus on companies that have already entered the SAF track: 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), etc. Risk warning Changes in SAF policies in the EU and China, lower than expected SAF demand, slow construction of SAF production capacity in the EU and other regions, lower than expected release of HVO and SAF production capacity in China, trade frictions, etc.