Asia is poised to produce more sustainable aviation fuel (SAF) than the region will consume this year and next, as new production facilities come online, according to oil executives and analysts. This increase in supply could lead to higher exports and potentially lower prices, a welcome change for airlines that have long complained about the high cost and limited availability of SAF, reports The Economic Times.
Several new SAF projects in Asia, outside of China, are starting or scheduled to begin production this year, with a focus on exporting to other Asian countries and Europe. Unlike Europe, which mandates 2% SAF usage for flights departing EU and UK airports, most Asian countries have low or delayed SAF mandates, with some beginning only later this decade. This lack of strong policy support and low consumption has slowed down 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 aviation consultant Shukor Yusof.
While SAF is crucial for reducing aviation’s carbon emissions, which accounted for 2.5% of global emissions in 2023, it currently represents only 0.3% of global jet fuel production due to its higher cost.
Forecasts indicate that Asia-Pacific’s SAF production capacity will reach 3.5 million metric tons per year by the end of 2025, up from 1.24 million tons in 2024. However, mandatory SAF usage in Asia will only begin in 2026, when Singapore and Thailand implement a 1% mandate.
Industry experts caution that anticipated production capacity doesn’t guarantee actual production, as profitability and demand play significant roles. Global SAF production in 2024 fell short of expectations, with IATA reporting 1 million tons produced instead of the forecasted 1.5 million tons.
“Demand in Asia is expected to lag behind supply due to the absence of uniform policies and mandates across the region,” said biofuels firm Apical’s Lamberto Gaggiotti.
Despite the lack of widespread mandates, some Asian airlines are voluntarily using SAF to enhance their environmental image. However, many airlines do not disclose their SAF usage.
New SAF production facilities are coming online in countries like Japan and Southeast Asia, with significant investments being made. Asia exported over 370,000 tons of SAF in 2024, primarily from Neste’s Singapore plant.
“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,” said IATA’s Hemant Mistry.
With increased supply and potentially slower demand, Asia is expected to remain a net SAF exporter through 2026, which could put downward pressure on prices. The price gap between SAF and conventional jet fuel has already narrowed.
Despite potential oversupply, companies like Neste and EcoCeres remain optimistic about the long-term growth of the SAF market, with plans to expand production and explore new markets.
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