China plans to roll out the use of ethanol in gasoline nationally by 2020, state media reported on Wednesday citing a government document, as Beijing intensifies its push to boost industrial demand for corn and clean up choking smog.
It's the first time the government has set a targeted timeline for pushing the biofuel, known as E10 and containing 10 percent corn, across the world's largest car market, although it has yet to announce a formal policy.
Mandates requiring that a minimum amount of biofuel must be blended into fuel for the nation's cars, similar to the United States and Brazil, are currently set at a provincial level.
"This news has greatly boosted confidence inside the industry," said Michael Mao, analyst with Sublime China Information, adding that without government support ethanol would likely be too expensive to survive in the market.
Shares in biofuel producers rallied on the news, with Shandong Longlive Bio-Technology Co surging 10 percent, on track for its biggest one-day gain since December 2015. Major producer COFCO Biochemical Anhui Co, a listed unit of state-owned grains trader COFCO, was up almost 6 percent.
A renewed effort to promote the nation's fledging biofuels industry will be a further blow to major oil producers. On Saturday, the government said it has begun studying when to ban
the production and sale of cars using traditional fuels.
The news comes after the government said late last year it would aim to double ethanol output by 2020 amid growing pressure to whittle down mountains of ageing corn in state warehouses.
China built up state corn reserves estimated at about 200 million tonnes, equivalent to a year of demand, following a now discontinued government stockpiling scheme that was aimed at supporting farmers.
The Xinhua report said the government aims to build an ethanol production base in the country's northeast, the main corn growing region, without giving further details.
"Experts have proposed expanding production and consumption of ethanol to balance grain supply and demand and efficiently dispose of surplus grains," an unnamed official from the National Energy Administration was quoted as saying.
China's use of renewable-based fuel lags the rest of the world, with only 3 million tonnes consumption in 2016, or less than one percent of total fuel use, the official added.
The report on Wednesday said the government also aims to have large-scale domestic production of cellulosic biofuels, which are made from sources such as grasses, trees and crop waste, by 2025.
China is currently the world's third-largest ethanol producer, but with output of about 2.1 million tonnes a year, production is a long way behind global leaders Brazil and the United States.