Analysis-Asia's Green Jet Fuel Ambitions Exceed Demand, Heralding Exports

by Trixie Yap (Reuters/Yahoo!) Asia's ability to supply sustainable aviation fuel will outpace regional demand this year and next as more production comes online, increasing exports and potentially lowering prices for the fuel, oil executives and analysts said.

Planned SAF production could take a hit if regional demand remains tepid and prices fall below production costs, industry sources say, though Asia's increased capacity is good news for airlines that have been complaining SAF is too expensive and hard to source.

At least five SAF projects in Asia, outside of China, have started up or are earmarked to start production this year, targeting exports regionally and to Europe.

Unlike in Europe, where flights departing EU and UK airports must now use 2% SAF in their tanks, Asia's mandated demand remains low with compulsory use of the renewable fuel in some nations to start only later this decade.

Low consumption and a lack of policy guidance have led to delays of some SAF projects in China.

"Asian airlines are still more focused on ramping up flights and SAF is not a top priority given it is still costlier than jet fuel and airlines will make less profit," said Shukor Yusof, founder of aviation consultancy Endau Analytics.

Aviation accounted for 2.5% of global carbon emissions in 2023. SAF, made from waste oil and biomass, is key toward reducing those emissions, but is costlier than conventional fuel and only accounted for 0.3% of global jet fuel production, global airlines body IATA said.

The Asia-Pacific region's SAF production capacity is set to reach 3.5 million metric tons per year (77,671 barrels per day) by end-2025, forecasts from Argus Consulting showed, versus 1.24 million tons in 2024.

However, the first compulsory use of SAF in Asia will not begin until 2026 when Singapore and Thailand enforce a 1% mandate. These requirements are expected to lift SAF demand from these countries to about 14% of their production capacity by 2026, Reuters calculations based on trade data showed.

Anticipated production capacity does not mean that much SAF will actually be produced given an industry focus on profitability and actual demand.

IATA said 1 million tons of SAF was produced globally in 2024, below forecasts of 1.5 million tons, and described production as disappointingly slow.

Recent project delays point to a very real risk that SAF penetration may actually begin to fall even as demand grows, said Ellis Taylor of aviation analytics firm Cirium.

South Korea's 1% SAF use will start in 2027, and Japan has a 10% mandate by 2030.

"Demand in Asia is expected to lag behind supply due to the absence of uniform policies and mandates across the region," said Lamberto Gaggiotti, the head of biofuels firm Apical's green energy business.

Outside of government mandates, some Asian airlines are voluntarily using SAF to boost their green credentials among customers and as part of industry sustainability commitments.

The Association of Asia Pacific Airlines, which counts many Asian flag carriers as members, has a target of 5% SAF usage by 2030.

Hong Kong's Cathay Pacific Airways said it used more than 6,800 tons of SAF in 2024, but did not provide a forecast for 2025.

Air New Zealand expects to use 1.6% SAF in the financial year ending in June, up from 0.4% a year earlier, but last year halved its SAF target to 10% by 2030 from 20%, citing its affordability and availability.

Japanese refiner Cosmo Energy will produce SAF from April. Investments in Southeast Asia this year have totalled more than $500 million, with Thailand's PTT Global Chemical having started its plant and Bangchak Petroleum to follow in the second quarter.

Asia exported more than 370,000 tons of SAF in 2024, ship tracking data from Kpler showed, mostly from Neste's Singapore plant, the world's largest.

"As the SAF market develops, it is to be expected that there will be gaps between where it is produced and where there is demand," IATA's director of energy transition Hemant Mistry said.

Taiwan's Formosa Petrochemical plans to produce up to 6,000 tons SAF for local airlines this year, its spokesperson KY Lin said, down from an earlier target of up to 10,000 tons in 2025.

The cost of producing SAF from used cooking oil is estimated at $500 to $600 per ton, including pre-treatment costs, he said, compared with SAF spot prices at around $1,700 per ton in Asia, according to industry sources.

With slower demand, Lauren Moffitt, head of Asia biofuels pricing at Argus, said Asia is likely to remain a net SAF exporter through 2026 with oversupply to pressure prices.

The price gap between SAF and conventional jet fuel narrowed from nearly three times last year to 2.4 times this year on a free on board (FOB) Singapore basis, Argus data showed.

But Neste, which expects global demand to hit at least 7 million tons in 2030, and newcomer Bain Capital-backed EcoCeres remain upbeat about growth prospects.

EcoCeres will bring online its 420,000 tons per year (tpy) SAF and biodiesel production unit in Johor, Malaysia, by the fourth quarter, CEO Matti Lievonen said, bringing the firm's total capacity to 770,000 tpy along with an existing plant in Jiangsu, China, as it eyes exports.

"While this new production further strengthens our supply to Europe, we are also exploring global opportunities such as Japan, Korea, Australia, China, and North America, all of which represent significant potential for growth." READ MORE