The increasing diversification of raw material supply and the increase in UCO/UCOME penetration rate are beneficial for China
The raw materials for biodiesel are diverse, and the supply structure is becoming increasingly diversified. In terms of raw material selection, the raw materials for biodiesel should meet the two basic requirements of "low production cost" and "scalable production" as much as possible. Currently, the raw materials for biodiesel production can be mainly divided into four major oils: vegetable oil, animal oil, waste edible oil, and microbial oil; There are advantages and disadvantages among various types of oil raw materials, and there are significant differences in the emission reduction effects of biodiesel products produced. Among them, the carbon reduction effect of waste edible oil methyl ester (UCOME) produced from waste edible oil (UCO) is the most obvious, so UCO is also known as the "carbon reduction star". In terms of supply structure, a diversified supply structure has been formed globally, with vegetable oil as the main source, waste edible oil and animal oil as auxiliary sources, and microbial oil as the new expansion direction.Due to differences in regional resource endowments, there are significant differences in the raw material supply structure of biodiesel among countries. For example, American countries such as the United States and Brazil mainly use soybean oil as raw material; European countries mainly use rapeseed oil as the raw material; Southeast Asia mainly relies on palm oil grown on a large scale as its raw material; However, in China, the principle of "not competing for food with people, not for land with grain" is followed, and the production of biodiesel mainly relies on waste edible oils (such as gutter oil and acidified oil) as raw materials.
Although the sources of biodiesel raw materials are very extensive, countries are increasingly paying attention to the use of waste edible oil (UCO) raw materials based on considerations of food security and environmental protection. Taking the European Union as an example, according to the 2018 EU Renewable Energy Directive, known as "RED II", catering waste oil raw materials are classified as Part B of advanced biofuel raw materials, and enjoy preferential policies of double counting in EU countries such as the Netherlands. On the contrary, some plant raw materials will gradually be phased out from the supply structure of biodiesel raw materials. According to RED II, the EU aims to freeze the annual usage limit of palm oil for biodiesel at the 2019 usage level by 2023, and plans to completely phase out palm oil from the raw material supply structure of biodiesel by 2030. At that time, the penetration rate of UCO raw materials is expected to further increase.
The transformation of raw material structure is expected to continue to drive up global demand for UCO/UCOME. From the perspective of growth rate, the global consumption of UCO raw material biodiesel (including UCOME, HVO, SAF) in 2021 was 6.586 million tons, a year-on-year increase of 9.5%. From 2010 to 2021, the CAGR reached 14.6%, making it one of the fastest-growing renewable fuel sub markets. From the perspective of consumption structure, Europe remains the world's largest consumer market for UCO fuel. In 2021, Europe consumed a total of 4.045 million tons of UCO raw material biodiesel, accounting for 61.4% of the global consumption of UCO biodiesel. We expect that global UCO/UCOME consumption is expected to continue to rise with the structural transformation of raw material supply in major biodiesel countries such as the European Union, as the biodiesel produced from UCO raw materials has the best emission reduction effect and does not affect food security and other natural advantages.
From the perspective of raw material supply, China is the core supplier of global UCO raw materials. The supply capacity of UCO is closely linked to a country's population base and dietary culture. In 2021, the total global production of UCO was about 6.4 million tons, of which China produced about 1.86 million tons, accounting for 29%. It is the core supplier of UCO raw materials globally, and related products are mainly exported to the European Union. In terms of potential supply, according to Greenea Analysis, the global potential supply of UCO raw materials may exceed 11.25 million tons, with China's potential supply reaching 6.1 million tons. Currently, there is still significant room for improvement in production capacity; In contrast, developed countries such as the European Union and the United States have approached the upper limit of UCO production capacity, and may need to import to meet domestic demand in the future.
From the perspective of finished product supply, at present, the main biodiesel products in China are UCOME. Based on the principle of "no competition for food and no competition for land" in the development of biofuels, the main products of biodiesel in China are waste edible oil methyl esters (UCOME) made from waste edible oil (UCO) as raw materials; Taking the export situation as an example, in 2020.
The transformation of raw material structure will benefit China, and the domestic biodiesel industry chain is expected to fully benefit. As one of the non grain raw materials that have been widely commercialized, UCO biodiesel (including UCOME, HVO, SAF) has a global market penetration rate of only 5% in 2021; Under the trend of transforming the supply structure of raw materials to non grain resources, the demand for UCO/UCOME in biofuel countries led by the European Union is expected to continue to rise, and market penetration is expected to further increase; As a core supplier of global UCO/UCOME, China's related industrial chains are expected to fully benefit.
