GTHT released a research report stating that the reorganization between Sinopec (600028.SH) and China National Aviation Fuel Group will integrate the entire chain of aviation fuel from upstream production to terminal refueling, accelerating the industrialization of Sustainable Aviation Fuel (SAF) in China, and domestic biodiesel producers are expected to fully benefit.
Benefiting from both volume and price increases for SAF, the feedstock of waste oil will become increasingly tight. China's theoretical annual production is only 12 million tons, with the current annual collection volume being about 5 million tons. As the SAF industry accelerates its commissioning, the industry chain's bottleneck will gradually shift from SAF supply to feedstock supply. Therefore, the firm comprehensively recommends investment opportunities across the entire waste oil-SAF industry chain.
GTHT's main views are as follows: The reorganization between Sinopec and China National Aviation Fuel Group According to Xinhua News Agency, on January 8, the State-owned Assets Supervision and Administration Commission announced that, upon approval by the State Council, China Petroleum & Chemical Corporation Group and China National Aviation Fuel Group Limited are to implement a reorganization.
This powerful alliance addresses the green transition and enhances the competitiveness of China's aviation fuel industry. 1) China National Aviation Fuel Group is the largest aviation transportation service support enterprise in Asia, integrating aviation oil procurement, transportation, storage, testing, sales, and refueling. Sinopec is the world's largest refining company and China's top aviation fuel producer. 2) This reform is a strategic move in the reorganization and integration of central state-owned enterprises, and also a proactive measure to address international competition and the green transition. The upgraded management of aviation fuel elevates its strategic importance, helps reduce costs for aviation fuel, and strengthens the competitiveness of China's aviation fuel industry. 3) This reorganization will integrate the entire chain of aviation fuel from upstream production to terminal refueling, accelerating the industrialization and implementation of SAF in China.
Global demand for SAF is robust, and short-term price fluctuations do not alter its medium-to-long-term investment value. 1) The EU mandates blending, accelerating the release of overseas demand. ReFuelEU requires that from January 1, 2025, SAF must account for 2% of the aviation fuel used by aircraft taking off from EU airports, with blending ratios reaching 6%, 20%, and 70% by 2030, 2035, and 2050, respectively. Based on the EU's annual aviation fuel consumption of 48 million tons and a 2% blending ratio, the annual SAF demand is estimated to be approximately 1 million tons. 2) Domestic pilot refueling is imminent, with demand set to scale up. Starting March 2025, the second phase of the SAF application pilot will commence. All domestic flights departing from Beijing Daxing, Chengdu Shuangliu, Zhengzhou Xinzheng, and Ningbo Lishe airports will routinely use a blended fuel containing 1% SAF. Assuming these four airports account for 10% of domestic flight traffic, with national jet fuel consumption in 2024 at 37.5 million tons and domestic flights accounting for 85%, the estimated annual blended SAF volume at these four airports is projected to reach 32,000 tons. 3) Stimulated by year-end assessments in 2025 and maintenance shutdowns at some European producers, SAF prices rose continuously before experiencing a phased decline. Prices are expected to gradually rise again from 2026 onwards.
Benefiting from both volume and price increases for SAF, the feedstock of waste oil will become increasingly tight. China's theoretical annual production is only 12 million tons, with the current annual collection volume being about 5 million tons. As the SAF industry accelerates its commissioning, the industry chain's bottleneck will gradually shift from SAF supply to feedstock supply. Therefore, the firm comprehensively recommends investment opportunities across the entire waste oil-SAF industry chain.
Risk warnings include fluctuations in raw material prices, capacity releases falling short of expectations, and policy changes.
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