China plans first 2025 B24 bio-marine fuel export quota to aid producers amid EU tariffs

China is planning its first export quota for B24 biodiesel-blended marine bunker fuel for 2025, partly to support biofuel producers hit by EU antidumping tariffs earlier this year, according to market sources and local reports.

The B24 blend contains 24% biodiesel, such as used cooking oil methyl ester, and 76% low sulfur fuel oil, which is also currently under quota management.

China's government is considering issuing a 500,000-mt bio-marine fuel export quota, which will likely be allocated to state oil firms CNPC, Sinopec and CNOOC, market sources said.

This export quota would be separate from the conventional LSFO quota, which stood at 13 million mt across the first three tranches in 2024, down from the 14 million-mt quota issued in 2023.

The most recent tranche of LSFO export quota, issued around late September, was only 1 million mt, roughly 200,000-500,000 mt below market participants' initial expectations, traders said, potentially boosting bullish prospects for benchmark valuations at the Singapore hub, where China tends to source most of its LSFO cargo imports.

However, slower-than-expected bunker demand for conventional LSFO around the North Asia's bunker hub of Zhoushan dampened previously stronger sentiments for the Asian LSFO complex, amid growing uncertainties over China's import appetite to fill any deficits for their downstream bunker market in the fourth quarter.

Market sources expect the B24 bio-marine fuel export quotas to be issued toward end-2024 or early 2025.

The plan aims partly to support China's biodiesel refiners hit by EU antidumping tariffs imposed in August. Effective Aug. 16, the EU started enforcing a 36.4% duty on biodiesel and hydrotreated vegetable oil from Chinese producers, with 40 companies that cooperated with the investigation receiving a lower duty of 23.7%.

Two other Chinese producers -- EcoCeres Group and Zhuoyue Group -- were also granted discounted duties of 12.8% and 25.4%, respectively.

As a result, China's biodiesel exports fell to 59,954.7 mt in August, down 40.8% from 101,300 mt in July, customs data showed.

Market reactions, pricing outlook

Platts, part of S&P Global Commodity Insights, assessed UCOME FOB China at $995/mt Nov. 15, up $10/mt week on week following the news.

State refiners may target supplying ships that operate between China and the EU, where shipowners using lower-carbon bunker would be entitled to carbon credits, said a state oil trader.

Another source said "the Zhoushan B24 quota will likely draw away demand from other bio-bunker ports like Hong Kong and Singapore".

B24 bio-bunkers delivered prices in southern China are currently around $170-$180/mt over Platts benchmark FOB Singapore Marine Fuel 0.5% sulfur cargo assessments, according to trade participants, but the market expects these prices to drop once the Zhoushan B24 quota kicks in.

Demand for marine biofuel, mostly B24, has gained more traction in 2024, especially in top refueling hubs like Singapore, as shipowners seek to lower emissions.

Singapore saw a 25.5% monthly increase in bio-blended bunker sales in October, reaching 138,900 mt, preliminary data from the Maritime and Port Authority of Singapore showed Nov. 15, indicating healthy demand for bio-bunkers, especially for bio-blended high sulfur fuel oil and bio-blended LSFO.

Bio-blended LSFO sales rose 25.8% month on month in October, the data showed, which market participants attribute to larger volume term contracts fixed for the second half of 2024.

Platts assessed Singapore-delivered bio-bunkers at a premium of $136/mt over Platts benchmark FOB Singapore Marine Fuel 0.5% sulfur cargo assessments Nov. 15, Commodity Insights data showed.