China's Biofuel Landscape Shifts Amidst EU Tariffs and Domestic Policy Changes
China's biofuel sector is navigating a period of change, marked by declining bio-based diesel exports to the EU and a renewed focus on domestic consumption, according to a report released by the United States Department of Agriculture (USDA) last week.
The EU's recent imposition of anti-dumping duties on Chinese biodiesel and renewable diesel, reaching up to 36.4%, has sent ripples through the Chinese biofuel export market. This move, however, excludes sustainable aviation fuel (SAF) from further tariffs.
Despite the export challenges, the USDA report highlights a surge in domestic biodiesel and renewable diesel consumption, driven by newly implemented government policies, including the rollout of biodiesel pilot scheme earlier this year across nearly two dozen locations in mainland China. These initiatives aim to bolster the domestic biofuel market, which has historically lagged behind export-oriented production.
China's fuel ethanol sector, primarily reliant on corn, is also experiencing shifts. While ethanol production and demand are projected to rise by 17% thanks to low corn prices, the report notes that government priorities appear to be shifting towards renewable electricity and electric vehicles. This shift is reflected in the inconsistent enforcement of the nationwide E10 blending mandate.
The report further emphasizes that while biofuels offer environmental benefits and potential for rural income support, these factors remain secondary to China's primary focus on renewable electricity and its burgeoning electric vehicle market.
"The relatively new HDRD [hydrogenation-derived renewable diesel] industry remains export-oriented, with small volumes consumed domestically," the report states, highlighting the industry's reliance on foreign markets. However, with new investments pouring into SAF production, utilizing feedstocks like used cooking oil, China is positioning itself to meet both domestic and international demand for this lower-emission aviation fuel.
Industry analysts will be closely watching how China's domestic biodiesel and renewable diesel consumption evolves in response to the new policies, particularly as the EU trade dispute continues.