China Great Wall: Policy and demand drive the core links of the biodiesel industry chain.

China Great Wall released a research report stating that the biodiesel industry is at the intersection of "global green demand expansion" and "China's unique resource endowment" track, with short-term performance supported by export demand and long-term market value space opened by domestic demand policies; attention should be paid to established raw material moats, with technology reserves and layout potential in advanced biofuels such as HVO/SAF, and considerable production capacity, with biodiesel companies having great flexibility to benefit from future demand growth. China Great Wall's main points are as follows: Under the global carbon neutrality wave, biodiesel, as a green energy source with both environmental and resource recycling values, is expected to enjoy a dual dividend of policies and demand. As industry technology iterates from the first-generation ester-based biodiesel (FAME) to the second-generation hydrocarbon-based biodiesel (HVO), HVO, with superior performance and carbon reduction benefits, is expected to become an important choice in high-end sectors such as transportation and aviation. The growth in demand for sustainable aviation fuels (SAF) may further open up industry growth. China, relying on its unique advantage of waste oils and fats (UCO) as raw materials, has formed a differentiated industrial path, but the current market still relies on exports, with the domestic market on the eve of policy catalysis, companies with raw material control, technological leadership, and scale advantages will benefit first from industry transformation. Biodiesel is one of the important solutions for carbon emissions reduction in the transportation industry. Biodiesel can not only replace some fossil diesel to achieve a certain degree of carbon reduction, but also promote the utilization of waste oils and fats to build a circular economy chain. The technology route continues to upgrade, with the first-generation FAME process being mature but having performance limitations, and the second-generation HVO using waste oils and fats as raw materials, achieving compatibility with petrochemical diesel through catalytic hydrogenation isomerization technology, and can also flexibly produce SAF, becoming the mainstream direction of the industry. Although the third-generation algae-based biodiesel has non-food advantages in raw materials, it is still in the technical research and development stage. In regions where policies are clear, such as the EU and the UK, the penetration rate of HVO is growing at a rate of several percentage points per year, becoming the dominant force in the biodiesel market. The global biodiesel market continues to grow, with demand in developed biodiesel markets such as the EU and the US mainly driven by mandatory blending policies. Mature biodiesel markets such as the EU and the US drive the growth of biodiesel demand through a series of support policies, especially mandatory blending policies. The EU plans to increase the share of renewable energy in the transportation sector to 29% by 2030, and the US RFS plan promotes the continued growth of biofuel consumption. According to IEA data, the global biodiesel consumption from 2009 to 2023 grew at a CAGR of approximately 10.34%, and is expected to grow at a CAGR of approximately 5.71% from 2024 to 2027; among them, the growth rate of HVO may be more significant, with IEA predicting that the global HVO consumption will grow at an average annual rate of 16.38% from 2024 to 2028. Global biodiesel production continues to increase, with supply gradually concentrating in regions with cost advantages, reshaping the future supply pattern. According to the OECD, global biodiesel production has been increasing year by year from 2012 to 2025, with a CAGR of approximately 8.08%. The EU and the US are the main production regions for global biodiesel, maintaining a certain growth rate overall. Countries and regions in Southeast Asia, South America, and China are expected to gradually change the supply pattern of biodiesel: Southeast Asian countries are rich in palm oil, giving them cost advantages as raw materials; South America, with Brazil and Argentina as the core, relies on the scale of soybean cultivation and mature pressing systems, with advantages in low-cost raw materials and compatibility with RFS; China uses waste oils and fats as raw materials, achieves carbon reduction while avoiding the problem of "gutter oil" returning to the table to a certain extent, with dual significance. Global biodiesel trade shows a trend of shifting from "cost advantages" to "policy heights", and the future main biodiesel production areas may develop in terms of cost, technology, and certification. The current global flow path of biodiesel mainly includes: Southeast Asia mainly exports low-cost raw materials to Europe, South America supplies the US with soybean oil-based products, and North America influences the global supply chain in both directions through technology exports and raw material procurement, with China mainly exporting biodiesel to the EU. This trade structure not only reflects differences in resource endowment, but also embodies a global market network centered on policy compliance. However, the global biodiesel trade system is facing increasingly intense challenges such as anti-dumping duties and certification thresholds, and the main biodiesel production areas in the future may develop in multiple aspects such as cost, technology, and certification instead of relying on a single raw material. China's biodiesel market is currently dominated by exports, with the domestic market on the eve of policy catalysis. China's "oil shortage and land scarcity" situation determines the industrial path centered on waste oils and fats (UCO) as core raw materials, with domestic biodiesel production capacity exceeding 5 million tons per year in 2024, with a production of about 3.035 million tons, but consumption is only 867,000 tons. According to customs data, in 2023, China's exports to the EU accounted for 95.69%, and in 2024, affected by EU anti-dumping policies, exports fell by 75.41% year-on-year, prompting the industry to transform to SAF and expand into the domestic market. Policy initiatives such as pilot applications of SAF and demonstration of biodiesel promotion in China have laid the ground for enormous domestic demand potential as pressure for emissions reduction in the transportation sector grow, which, combined with the continued introduction and improvement of future domestic policies, may lead to large-scale growth in the domestic market. The core barriers of the biodiesel industry are focused on raw material control, technological breakthroughs, and economies of scale. On the raw material side, biodiesel typically accounts for over 80% of raw material costs, and companies with a stable waste oils and fats recovery network or long-term cooperative channels can build a cost moat; on the technology side, HVO/SAF production involves complex processes such as catalytic hydrogenation and isomerization, with technology routes such as Honeywell UOP becoming mainstream, and domestic leading companies have achieved commercial production of SAF and obtained international certification; on the scale side, large-scale facilities can spread fixed costs, with global top companies having HVO production capacities generally exceeding 500,000 tons per year, and domestic companies accelerating production expansion. In addition, as SAF is a key means for the aviation industry to decarbonize, benefiting from policy requirements such as EU ReFuelEU, IATA predicts that global SAF demand is expected to reach 18.40 million tons by 2030, potentially opening up a second growth curve for companies with HVO/SAF. Risk warning: Risks of raw material supply and cost fluctuations; Risks of international policy changes; Regulatory and compliance risks; Product substitution risks; Supply-demand imbalance risks.