KaiYuan Securities: Multiple countries' policies support the development of the biofuel industry, and the industry's prosperity is on the rise

According to the Zhitong Finance APP, Kaiyuan Securities released a research report stating that, according to Longzhong Information data, as of July 30, the FOB prices of SAF in the EU and China were $2,023 and $1,850 per ton, respectively, representing increases of 10% and 3% compared to the beginning of 2025. Recently, the European Commission approved a €36 million incentive for airlines operating in Denmark to use SAF on domestic routes, marking the first time the European Commission has approved a national aid program aimed at promoting the use of SAF. Domestically, starting from March 19, all domestic flights departing from Beijing Daxing, Chengdu Shuangliu, Zhengzhou Xinzheng, and Ningbo Lishe airports will regularly refuel with a 1% blend of SAF, with expectations for a large-scale pilot program at provincial capital airports in the third phase in the third quarter.

Key points from Kaiyuan Securities are as follows:

SAF: Continuous support for the SAF industry development from the EU, UK, and China, with SAF demand expected to grow steadily

According to Longzhong Information data, as of July 30, the FOB prices of SAF in the EU and China were $2,023 and $1,850 per ton, respectively, representing increases of 10% and 3% compared to the beginning of 2025. In the EU, on July 28, the European Commission approved a €36 million incentive for airlines operating in Denmark to use SAF on domestic routes, marking the first time the European Commission has approved a national aid program aimed at promoting the use of SAF. In the UK, the government has designated 17 sustainable aviation fuel (SAF) and e-fuel projects in the third round of its Advanced Fuels Fund (AFF), providing £63 million in grant funding.

In China, starting from March 19, all domestic flights departing from Beijing Daxing, Chengdu Shuangliu, Zhengzhou Xinzheng, and Ningbo Lishe airports will regularly refuel with a 1% blend of SAF, with expectations for a large-scale pilot program at provincial capital airports in the third phase in the third quarter. In the future, as various countries continue to implement policies supporting the development of SAF, demand for SAF is expected to grow steadily.

UCO: Growing UCO demand and increasing carbon tax prices may lead to further UCO price increases

According to Longzhong Information data, as of July 30, the ex-tax price of used cooking oil (UCO) was 7,050 yuan per ton, the highest since 2024. The downstream demand for UCO is driven not only by the growth in SAF demand but also by the increase in HVO demand. As suppliers abandon traditional biodiesel to meet EU targets, stricter biofuel requirements in Northwestern Europe may push HVO consumption to a historical high by 2026. According to Argus Consulting, HVO demand in Germany alone could increase by 1.5 million tons by 2026, nearly four times the level of 2025.

In addition, the prices of California's low carbon fuel standard credits and EU carbon permits have continued to rise since July, further increasing the added value of UCO. While downstream demand for UCO continues to grow, the supply of UCO is limited, and future UCO supply may remain tight, with the possibility of further price increases.

Biodiesel: The EU cannot confirm fraud in Chinese biodiesel, and demand is increasing due to biofuel shipping According to data from Longzhong Information, as of July 30, the FOB prices of first-generation and second-generation biodiesel in China were USD 1,155 and USD 1,675 per ton, respectively, representing increases of 10% and 9% compared to the beginning of 2025. On July 18, the European Commission issued an official notice stating that existing data could not confirm the existence of fraud in biodiesel imports from China. On July 24, the 64K bulk carrier "Yu Zhan" successfully completed its first B24 biofuel refueling at the Port of Singapore. Due to space constraints on small vessels, which are not conducive to the installation of LNG tanks, the refueling of B24 biofuel on "Yu Zhan" indicates that small vessels have opened a new chapter in low-carbon applications. According to MPA data, Singapore's traditional ship fuel sales are projected to be 53.58 million tons in 2024, and if the B100 biofuel policy is implemented, an increase in demand for biofuels in Singapore can be expected.

Beneficiary Targets

Shan Gao Huan Neng (000803.SZ): The major shareholder plans to raise CNY 720 million through a private placement to supplement working capital and repay bank loans, aiming to increase waste processing capacity from 5,490 tons/day to 8,000-10,000 tons/day, which will double UCO production. Jia Ao Environmental Protection (603822.SH): China Aviation Oil intends to acquire CNY 260 million in additional registered capital from Lianyungang Jia Ao (holding 10%), helping the company gain market share in the domestic SAF market, while the company has plans to build phase two SAF capacity. Zhuo Yue Xin Neng (688196.SH): Planning 300,000 tons of first-generation biodiesel and 100,000 tons of HVO/SAF capacity in Thailand; planning 200,000 tons of first-generation biodiesel capacity in Singapore; cooperation projects in Saudi Arabia are underway. Others: Hai Xin Neng Ke (300072.SZ), Peng Yao Environmental Protection (300664.SZ), etc.

Risk Warning

Policy advancement may fall short of expectations, significant increases in raw material prices, and technological progress may not meet expectations