EU Faces Significant SAF Supply Gap, Creating Export Opportunities for Chinese Companies

EU Faces Significant SAF Supply Gap, Creating Export Opportunities for Chinese Companies

On January 1 this year, the EU's SAF mandate officially took effect. The mandate requires that all flights departing from EU airports must use fuel blended with at least 2% SAF. Moreover, this blending ratio will increase annually, reaching 6% by 2030, 20% by 2035, and a staggering 70% by 2050. To ensure compliance, the EU has stipulated that fuel suppliers failing to provide sufficient SAF will face fines. As a result, the aviation industry is treading carefully to avoid penalties.

Under this mandate, the EU's SAF market is facing a severe supply-demand imbalance. In 2025, Europe's SAF consumption is projected to reach 1.9 million tons. However, the current SAF production capacity in Europe is only about 1 million tons, meaning the market will face a shortfall of nearly 900,000 tons this year alone. Meeting demand will require a massive increase in production capacity. Yet, only five SAF plants are currently operational in Europe, and new capacity expansions are slowing, with multiple projects facing delays.

In 2024, major energy companies such as BP, Shell, and Uniper either postponed or scaled back their SAF production plans. The primary reasons include high production costs, which squeeze profit margins, and financing difficulties. Analysts estimate that Europe will not achieve a balance between supply and demand until at least 2030. Meanwhile, rising demand and cost pressures are expected to drive SAF prices upward.

As the first major global economy to implement an SAF blending mandate and the core market for SAF demand, the EU’s supply-demand mismatch presents a significant opportunity for Chinese companies.

By December 2024, China’s SAF production capacity had expanded to 1.05 million tons, following trial production announcements by Jiaao Environmental Protection and Pengyao Environmental Protection. Additionally, China has nearly 3 million tons of SAF capacity under construction or planned, led by companies such as Haineng New Materials, Junheng Biology, Jiaao Environmental Protection, Sichuan Tianzhou, Haike Chemical, Jinshang Environmental Protection, Sinopec, and Langkang Environment.

Since China currently has no mandatory SAF blending policy, domestic demand remains minimal. Consequently, Chinese SAF producers are primarily targeting exports.

Globally, the dominant SAF production method is the HEFA pathway, and China happens to be the world’s largest exporter of UCO (used cooking oil). Notably, in November last year, China’s State Taxation Administration abolished the UCO export tax rebate, aiming to secure domestic UCO supply for SAF production. This move signals that China prefers exporting finished SAF rather than raw UCO.

Another positive development is that while the EU currently imposes anti-dumping duties on Chinese biodiesel exports, SAF is exempt, creating favorable conditions for SAF exports.

In the early stages of SAF market development, a geographical mismatch between production and demand has emerged. Those who seize this opportunity stand to gain the most from the impending surge in demand. For Chinese companies, the key to success lies in capitalizing on the EU’s policy window, aligning with certification systems, and integrating carbon accounting standards ahead of competitors.