Good afternoon. Welcome to Neste Capital Markets Day 2021. This is a virtual event which we are broadcasting live from the Helsinki area. I'm Juha-Pekka Kekäläinen, the Head of Neste Investor Relations, and I will be moderating this event. Let's have a look at the program. We will have presentations on group strategy and businesses by our President and CEO, Peter Vanacker, and his team. There will be a short Q&A after each presentation, and if you would like to ask question at that time, write it to the chat box below the stream window. We will also have a joint Q&A session with all the speakers at the end of the program. You will have a chance to ask live questions via the separate call lines provided.
We will have one short break in the middle, and the event will be wrapped up by Peter with his concluding remarks. As always, please pay attention to the disclaimer since we will be making forward-looking statements in the presentations. Let's now begin with our first speaker, Neste's President and CEO, Peter Vanacker.
Welcome also from my side. Of course, it's a virtual event. Hopefully, it's going to be the last virtual event because I'm really looking forward to meeting you again in person and being able also to answer your questions in person. We're going to do this virtually as set, and I'm really looking forward also to receiving quite a lot of your questions. As usual, I have no doubt about the fact that you will ask a lot of questions and good questions as well. We have a full program for you, but also with breaks in between so that there is time for questions. We have a number of speakers, and we've selected the speakers that fit with our aspirations. Our aspirations are we want to be a leader in renewable and circular solutions.
I will be supported also today by Thorsten, who will speak after me on the potential that we are having in Renewable Aviation. Mercedes, who is heading the Renewable Polymers and Chemicals business, will then speak about the progress that we have made in polymers and chemicals, as well as the huge potential we are having in this area. We will have Kalle also talking about Renewable Road Transportation. As you know, he is managing that business extremely successfully with the expansion that we have on a global basis. We continue to see a continuous growth in that area.
Matti will talk about all the efforts that we have undertaken in going more upstream, a leadership position that we have built up in waste and residues, but also in the supply chain, as well as, of course, our plans that we have in terms of the expansion of our production. Jyrki, of course, as you know very well, he will talk about the financials as well as what are our aspirations that we have. With this, let me first of all remind you on our purpose. Our purpose is creating a healthier planet for our children, and this is what drives us at Neste. This is extremely important, and that's why I want to start the Capital Markets Day with this slide. Every person that we have hired in the company is meeting that expectation.
We are looking when we are hiring our people, if with their heart, they're standing behind this purpose. That is what makes this company so strong because every individual in our company is having that inner motivation to create a healthier planet for our children. A healthier planet also means that we need to focus on safety in our company. You see here that we have made excellent progress in terms of our safety. On one hand side, when we are talking about occupational safety, so personal safety, it has been one of the best years ever in our history. Very low accident rates. The same I can say also about the progress that we have made in process safety. One of the best years in process safety.
You need to put this into the context, the context is that we are building up a huge facility in Singapore. We had quite a lot of shutdowns during the last year and this year that were scheduled. We have a pandemic environment, on top of that, we had the five-year scheduled shutdown in Porvoo. We have the best performance in occupational and process safety. If I move from the safety point of view towards what has happened to our company in terms of the share price development. Here you see that if we compare it to 2018. Our share price has had a tremendous development, 190%+ compared to 2018. Even more so if you compare it to the share price development of a group of our peers.
Well, we have outperformed by far our peers, that delta is of course more than 210% if you add it up. Also, a lot has changed in the ownership of our company. That change, if you look at the available shares, if I now just take out the shares that are in the hands of the state of Finland as well as the climate fund in Finland, you see here that ESG funds already represent 44% of the top 100 institutional owners. This doesn't come just by being lucky, I would say. It is because of the progress that we are making because of continuously being one of the top 10 in the Knights Index of the most sustainable companies in the world. Now, if I look back a little bit, what has happened compared to the last Capital Markets Day?
A lot has happened, as you know. If I look first of all commercially, we have raised the sales margin levels from where we were in the past, around $400-$500 per ton, to being now what we call healthy, $600-$700 per ton. We've a numerous amount of sustainable aviation fuel agreements that we have signed. We are in a numerous amount of airports. We have lots of partners in the renewable aviation business. Thorsten will talk about that in more details, and you will see it is impressive in that short period of time what we have been able to accomplish. The same is valid also when we are talking about renewable polymers and chemicals. Substantial amount of progress has been made. We're developing a leadership position in the circular bio-economy. That on a global basis.
In terms of our production, we have our Singapore expansion that is, despite the pandemic, quite challenging, but on track to be able to start it up at the end of Q1 2023. In addition to that, we have also decided that we want to invest in our Rotterdam facility and build up that optionality so that we can also produce out of the existing capacity 500,000 tons of sustainable aviation fuel by 2023. That project is also very well on track, underway. You know that we are investigating where are we going to build up the next world-scale facility. Also that work that is currently being conducted, the so-called definition phase, is well on track. Matti Lehmus will talk about it so that we are ready to take such a final investment decision than at the beginning of next year.
Also in the oil products business, accelerated by the pandemic, we have driven forward a consolidation, and that consolidation has led to the fact that we are now fully focusing on our Porvoo refinery after we have shut down the refinery operations in Naantali. An enormous amount of work also here in terms of production. M&A. Huge amounts of M&As that we have been able to accomplish. This is really, I want to reinforce that message that where we came from in the past where we hardly did any M&A, we have done the highest-ever number of M&As in the history of our company in a pandemic environment. M&A for us needs to be strategic, so it is on one hand side going upstream in getting access to more waste and residues, including the supply chain.
You have seen a number of these acquisitions and just recently the announcement on the acquisition of Agri Trading in the United States. Also the other part is getting access to new technologies as we are going broader in the amount of technologies that we are applying to be a leader in renewable and circular solutions. In terms of sustainability, we had made the promise on Scope 1 and Scope 2 emissions. We also have made our promise that we want to help our customers reduce their greenhouse gas emissions. Well on track on both of these promises in the implementation. We have embedded that also into how we are measuring the performance of the top management in the company. Today it is embedded in our long-term incentive.
If I now move from looking at what we have accomplished during the last 12, 18 months towards what is happening in the market, what is happening around us, what's the future going to bring, and how is our strategy going to make sure that we build up that position, as I said, leader in renewable and circular solutions? The demand for renewable products is growing substantially, and that has to do with higher climate ambitions, a supportive regulation. You all know that the Fit for 55 is raising the bar in Europe. We've seen with the Biden administration that the bar is also being raised substantially, both in road transportation as well as with their latest discussions around the sustainability of flying, of aviation. Also plastic taxes are being imposed. Here, the frontrunner, again, is European Union.
You see a lot is happening, and if you look back into history, then I can't remember a period where so much has happened in 12, 18 months periods' time. That will continue to drive the demand for our renewable products. If I look at our strategy, global leader in renewable and circular solutions, what does it actually mean? Well, it is based upon three different pillars. The first pillar is, of course, growing, growing. That is growing our renewable and circular solutions. The second pillar is getting ready for the future. We'll need more technologies in the future to be able to decarbonize our industries. The third pillar is, of course, boosting our competitiveness and continuing with our transformation. Let me go through those three pillars from a very high level in what it means in terms of our strategy.
If we look at growth and we think in 2030, how will Neste actually look like? Well, we try to imagine ourselves. How big could a renewable aviation business be? How big could a renewable polymers and chemicals business be? We came up with, well, renewable road transportation will continue to grow. The potential is huge that we have, so that will continue also by 2030 to be a very, very important part of our business, let's say around 60% in terms of volumes. Polymers and chemicals as well as renewable aviation, they each could be around 20%. Will it be more? We don't know, but at least it will be substantial businesses, that is the key message, by 2030. Why am I saying that? I'm saying that because of all the progress that we have made during the last 12, 18 months.
Thorsten, Mercedes, as well as Kalle, they will talk about that. They will give you the evidence of what is happening around you, and therefore, why we are so convinced about that being very substantial businesses by 2030. If I look at the second pillar of our strategy, and that is getting ready for the future, here we're talking about different types of technologies that will be needed. At the end, what we are talking about in our business is we need renewable carbon and renewable hydrogen, green hydrogen. These are, let's say, our basic components. We develop different production technologies so that with these components, we can produce drop-in molecules, specialty molecules that our customers in our target industries, they can immediately switch from fossil-based towards these renewable or circular molecules.
We have different types of raw materials coming out of different types of waste and residues. The renewable carbon can come out of fatty acids, which today is what we are using with our NEXBTL process technology. Of course, they can also come out of municipal solid waste. They can come out of the air, CO2 out of steel mills, CO2 algae technologies, lignocellulosic technologies, recycled waste plastics. If you add that all up, I've seen an analysis from McKinsey that is talking about more than 1 billion tons of waste and residue that eventually would be available. The core is developing the production technologies so that we can recycle that very good carbon, that renewable carbon, to make drop-in solutions, molecules for aviation, polymers, chemicals, as well as road transportation.
If we look at the different production technologies, I mentioned NEXBTL already, but also investing into co-processing, Porvoo plays an important role here. Chemical recycling in polymers and chemicals, as well as the different innovation business platforms that we have referred to in the past that we are developing. What's the progress that we have made on these innovation business platforms? We have, if I go one by one, renewable hydrogen, we have a pilot project ongoing in Rotterdam together with partners. We have a feasibility study ongoing for Porvoo. How can we get renewable hydrogen? Secondly, Power-to-X, e-fuels or e-hydrocarbons. Here we talk about the technology end-to-end mapping that is ongoing. There are different types of technologies currently that we are evaluating. There are different startup companies with projects that we are evaluating. There are more than 30 actually in the world.
We're looking at, okay, with whom do we actually want to work? What is helping us in our strategy to accelerate? Algae, very good progress because in laboratory, it fits to our NEXBTL technology. Here it's about how can we now move from a laboratory to a demonstration scale. Lignocellulosics , we have evaluated alternative technologies, and we are now in the next phase of project development. That is then ongoing. Municipal solid waste, also here we are in an initial assessment of scalable production technologies and then that need to then lead to decisions. What is important to take away is that we are targeting that at least in one of these innovation business platforms by 2030, we want to have an industrial scale operation.
Which one it will be, I cannot tell you today because we need to evaluate all these different options and see what is the economical feasibility and scalability of these technologies. When I talk about the third pillar, that is when we are talking about sustainability. We reflected upon sustainability, you know that we are very advanced in terms of our standards with regards to climate. We are now enhancing that vision so that we are also covering biodiversity, human rights, as well as supply chain and raw materials, we're increasing the bar for us, for our company, for our employees. In terms of climate, we have already the Scope 1 and Scope 2 definition. As you know, production carbon footprints, we want to reach a carbon neutral production by 2035. We have our carbon handprint.
Last year, we helped our customers to reduce their greenhouse gas emissions, CO2 emissions by 10 million tons. Our aspiration is to double that by 2030. Of course, we need to have capacity in order to get there. The new thing that we are adding to our plate is on the Scope 3. To reduce the carbon emission intensity of our sold products, we're now working with our suppliers, with the partners to reduce those emissions across the value chain. We will talk about that more during the next 12 months. What does it mean? What is it that we concretely want to commit to? As usual, as a company, we do, first of all, our bottom-up analysis, and then we make our promise. If I talk about the third pillar of our strategy, remember operational excellence.
On the Neste Excellence program, I will leave that up to Jyrki. He will talk about the new targets. If I talk about what is happening in Porvoo, then we have a clear ambition now that we have stopped the production in the Naantali facility in terms of oil-based refining, and we fully focus now on Porvoo. The ambition is to make Porvoo the most sustainable refinery in Europe by 2030. How do we want to get there? Fastest net zero production ambition, 50% of production CO2 emissions cut by 2030, enabling our customers to reduce their own emissions, which means that at least 10% of the raw material by 2030 will be based upon renewable and circular feedstock instead of fossil products, crude oil. Thirdly, of course, ensuring a sustainable cash flow generation.
The function of the oil products business in our entire portfolio in the company is cash flow generation. That also means that we need to then look at what is the setup in terms of our portfolio of assets as well as in products so that it generates the maximum in terms of cash flow. If I summarize now to just start this Capital Markets Day, then we have made strong progress in strategy execution, and that also since the Capital Markets Day in March 2020. No doubt about the fact that growth of renewable businesses will continue and actually is being accelerated. Thirdly, we're setting very high standards for sustainability with a new, broader vision. Fourth, innovation is core. It is in our DNA. That is what is differentiating us compared to our peers. It will continue to be at our core. We're expanding in innovation.
We're investing more in innovation, and therefore, it will be the key to success, not just on NEXBTL, but also for the future generations of technologies. With this introduction, I would like to open the floor to some questions. J.P.?
Thank you very much, Peter. We are getting questions through the chat box, and as a reminder, please keep them coming. Let's start with first of a personal note question. Are you satisfied with the progress so far, considering the pandemic and things like that?
Yeah, it's a very good question, and if I look at when we were just going into the pandemic and the concerns that we had and business continuity plans that we developed, and of course, also some cost containment, well, it is impressive what this group of people have been able to accomplish in a pandemic environment. Am I happy? I would say I'm much more than happy. It's amazing. It's just as amazing.
Good. Thank you. A question from Iris. Given your strong balance sheet, can you discuss more about your capacity expansion plans beyond 2025, i.e., after Singapore and Rotterdam? Do you still aim to keep a 40% market share in road traffic in the long term?
Very good question, Iris. Thanks for the question as well. You know how we operate. We look at what can we do and go one step at a time. That is also how we are communicating. Now today we are focusing on the transformation of the oil products business. We are focusing on that Singapore EUR 1.5 billion investment. We are focusing on a couple of hundred millions that we are investing in Rotterdam with the optionality to have half a million tons of sustainable aviation fuel. We are also having our engineers working on a definition phase for the next EUR 1.3, EUR 1.4 Singapore scope of investment, if we take that final investment decision, then as you know, in Rotterdam. That is a lot that we have on our plate. I like our people to be focused on this.
We've said we want to help our customers reduce their greenhouse gas emissions by at least 20 million tons by 2030. That gives you an indication of what the direction is that we are taking.
Great. A question on the making Porvoo carbon neutral by 2035. Kati Pohjanpalo is asking, what is your ambition based on this carbon neutrality ambition? Does it imply that stopping the use of fossil-based raw materials, or is it based on carbon offsetting?
Well, it's 80 projects that we are currently, Kati, working upon. Yeah. They go from replacing crude oil by waste and residue streams. We're looking at how can we get access to green hydrogen. First of all, we want to reduce the emissions. Of course, if there is a remaining part, then we will have to go to carbon capture and storage. In that whole context, of course, we also compare what is the capacity that we will need in the future. Yeah. You can't take it for granted that the current capacity will also be the capacity that we will have in 10 years or 15 years from now. It may be, but it is not, let's say, a predefined number of capacity, and then we transform it into green capacity.
Very good. Henri Patricot asks, do you feel a need to speed up the feedstock supply chain integration, given the speed of capacity additions by competitors?
Well, I think we have been able, Henri, to demonstrate that we are extremely fast, despite the pandemic, as I said. We've gone organically, as you know, in China, in Australia, New Zealand, Eastern Europe, southern part of Europe. We've gone through acquisitions upstream in the U.S. Wherever we have a chance and we find something, we have acquired. I wouldn't know what we can do faster than what we have been able to do. Having said that, it means that it is a core element of our strategy, so we will continue to work on that and continue to make progress.
Good. Question from Antti Koskivuori. How do you see the role of oil products business for Neste longer term? In your view, does oil refining shadow the ESG story in renewables?
That's a very good question. As I said, I showed it on one site . We have consolidated Naantali. We're talking only now about one site, which is one of the best net cash margin sites in the industry in Europe. That one site, we want to turn it into the most sustainable refinery in Europe.
Good. Jason Gabelman asks, how do margins from recycled chemicals compare to renewable diesel? Will recycled chemicals be processed at Porvoo plant or different facility?
Yeah, as I've said before, the way how we go into the different markets that we are developing is that it should not be dilutive to what we can accomplish today. Yeah. That is valid for sustainable aviation fuel. It's valid for polymers and chemicals as well.
Good. Lassi Rosala has a question on Naantali. Have you got any short or long-term plans for the Naantali plant?
Well, we have turned Naantali now into a harbor and terminal. Of course, it was already a harbor and it was already a terminal, but that's the focus now of the facilities that we have, and that is because it is having a very good location to serve our customers. The second point is we're working together in a consortium to look at what could be a future purpose of the Naantali facility. One may think in terms of longer-term industry, business park type of approach.
Good. Kimmo Syväri has a question on the COVID impact on aviation fuel sales. How largely by percentage, he asks?
Well, we didn't have in our business as we are starting up this business, and we have positioned ourselves, like Thorsten will say, as a global leader in sustainable aviation fuel. We didn't have any reduction because of a pandemic. It has been continuous growth despite of the pandemic, and we've seen that the airlines have made the sustainability budgets available.
Yeah, continuing on the SAF theme, Andrea asks, what do you think will be your market share in SAF?
Well, I would refer to that question then later on. If Thorsten is giving his presentation, then he can talk about that. If there are still, of course, open questions around it, then we have the chance there will be a Q&A.
Very good. Artem has a question. In terms of production technology development, co-processing is expected to mature in one to three years. What are the most interesting carbon sources here? Whether Neste is planning to make related investments in this area within the next few years?
Yeah, we are talking mainly about two sources. One source is the waste carbon or renewable carbon that is coming out of very low quality waste and residues. They can be lipids, but they can also come out of lignocellulosic . The other group is that commitment that we have made up to 2030, that we want to use at least 1 million tons of liquified waste plastic. Liquified waste plastic is a good source of renewable carbon.
Henri has a question. Henri Patricot wrote, "Any sense of which ones of the innovation platforms are most likely to reach commercial level by 2030, and which ones are more challenging?
Our approach, in the innovation business platforms, is that we are all treating them equally. Yeah. They have the resources that they need to further develop. They have a stage gate with what needs to be accomplished, and we try to avoid to jump to conclusions too early. That would eventually, we would run the risk that we make a mistake, we are focusing on one technology, and then later on, another technology may show to be more economically feasible, or from an incentive, from a regulation point of view, technology that gets more attention than the other technology. All things are equal at this point in time, and we are not yet taking any decision on accelerating one versus the other.
Good. Still one on SAF. "You will have 1.5 million ton capacity by the end of 2023, but over what timeframe would you expect that to be fully utilized?" Asks Peter Low from Redburn.
Well, Peter, we will continue, of course, to ramp up. As said, today we have 100,000 tons of capacity available and pretty much sold out. We will have 1 million tons of capacity in Q1, towards the end of Q1 with the Singapore facility, and we will have half a million tons in the Rotterdam facility towards the end of 2023. That will enable us to grow in that market at the right margins. Very important, at the right margins on a global basis. Again, Thorsten will talk more about that. To put it into the context, it also means that we build up this optionality in all our plants. I have not mentioned that in my presentation, but you know that I've mentioned it multiple times, which means that we have in Singapore full optionality.
We can serve polymers, chemicals, aviation, as well as road transportation. That can be steered out of a control room. It's not a batch process, it's a continuous process. The same thing is what we are now doing in the Rotterdam facility.
Thank you, Peter. That was the last question for this time. We will have the Q&A later on and so forth. Let's welcome on stage our next speaker, who will be the EVP of Renewable Aviation, Thorsten Lange.
Good morning, good afternoon, and good evening, wherever you are. Thank you, Peter, for the nice introduction, and by the way, for all the question on sustainable aviation fuel that you had already. I will do my best to answering all of them. It is now 18 months that I was standing last on that stage here talking to you about sustainable aviation, and I promised you that sustainable aviation will kick off or will take off, as we say in aviation. Actually it did. It did much better than even I expected, and I am normally a huge optimist. It is a very attractive and high-growth market due to various reasons, by the way. One we heard already, it's about regulations. Regulations are actually developing the way we expected it to develop in different areas of the globe, and I will be coming later to that.
Also in parallel, and massively, especially in the last 18 months, the voluntary market has developed. What does voluntary mean? It's the deeper meaning of that word. It is on top of what people have to do or where people have incentives that they can get when they're buying something. Voluntary means there is a potential to selling product with the full premium without any help from any regulations or markets. This voluntary market is growing. Why is it growing? SAF has now been identified as the real tool to reducing greenhouse gas emissions. There's a third thing why things have been developing that quickly, and that is perception. People have realized, especially during the pandemic, that flying must become more sustainable. If you're talking to passengers at airports now, they're saying, "Yes, sure. I'm willing to contribute. I'm willing to compensate." Same applies to corporates.
To corporates that have to sharpen their profile, they do, and I come to that later as well. The last thing is that also regulators have now realized that they have to do things, and they do, and that I will tell you in a minute. In a nutshell, we were able to really strengthening the leadership position that we already had when I was talking to you one and a half years ago. Actually here you can see what happened. Peter already referred to that. We will be able to be producing one and a half million tons of sustainable aviation fuel by the end of 2030. Will it be fully used as sustainable aviation fuel? Nobody knows. You heard the explanation earlier.
It could well be that we have other optionalities and that those products will go into other channels, but potentially end of 2023, we will be able to sell 1.5 million tons of sustainable aviation fuel, and we will be growing with the market as the market grows. Now, I'm in particular very proud of the column number 2 here, with more than 30 partners having joined our journey on the sustainable aviation fuel path. It's a very diverse group. It includes airlines, business aviation, cargo, corporates, fuel suppliers. Other interested parties, like the regulators, are also on board. Something we must not forget here, it's the airports. Airports are playing a very, very important and crucial role in building up our supply chain, in demonstrating that sustainable aviation fuel can be made available.
As you can see here, we have been successful on more than 20 airports across the globe, in Europe, in North America, and in Asia -Pacific, since I talked to you last time early 2020. Regulators have come on board. Regulators have introduced regulations, some of them more ambitious, some of them less, but all the regulations that are kicking in have one in common, they are supporting the use of SAF. How does that look like? I would say wherever you look on the globe, you have areas of different maturities when it comes to regulation.
If I may start from left to the right, from West to the East, you see that there is a very, very attractive opt-in scheme in place already in the West Coast of the U.S., that attracted a lot of business and made us moving into those locations and made the airlines buying the fuel there. It was so attractive and so interesting that now the East Coast, let's say, woke up and are also looking into respective programs. On top of that, the Biden administration now is really making an effort to pushing SAF by also introducing, hopefully introducing, the so-called sustainable aviation fuel BTC, a dedicated BTC for sustainable aviation fuel between $0.0125-$0.0175 per gallon. Quite something that helps the business.
We have Europe, where you can see quite a big development from 2021 into 2030, where there is kind of modest mandates being introduced in typically the northern countries, but with high ambition when it comes to 2030, where you have some countries even moving up to a goal or a target of 30% mandate in 2030. Seven countries here, led by the Nordics, followed by the Netherlands, but also the France, U.K., and not to forget a very good story here that the ReFuelEU is now on its way. The European Union basically managed to agreeing on the basic mandate that will really support and push the business here.
We have Asia, where we are having our facilities, where we will be having our production from 2023 on, and we will be in that market with public affairs, with sustainability people, but also with sales in parallel to our production to helping our customer in that region. You have seen now New Zealand and Australia, Japan and Singapore, thoroughly observing the markets, especially in Europe, and probably following those examples. That altogether results in a massive increase in potential demand from a relatively small number, as you can see here in 2021, to already more than 3 million tons in 2025 and more than 12 million tons, most likely in 2030.
That 12 million tons is a number that is massively smaller than what you may have heard just yesterday, the announcement coming from the World Economic Forum and the Clean Skies for Tomorrow Coalition, where 60 of the global leader in aviation, all the stakeholders from banks, fuel producers, airlines, airports, and OEMs, declaring that they are willing to pushing for a 10% share of the overall worldwide uplift on fuel. If you just take Europe or the U.S. and Europe and just assuming there is no increase in consumption, we're talking about a fossil consumption of 60 million tons, which would already lead to a share of 6 million tons of sustainable aviation fuel in Europe alone. What you also can see here is a shift from incentives and modest mandates into a strong mandate market in 2030. All this cannot be done without partners.
I'm very proud to see that a very strong team of aviation enthusiasts that we have in Neste managed to getting in touch and managed to partner up with all the airlines, with all the OEMs, with distributors and other customers that you can see on that screen here, to spreading the message, to being at the airport, to making sustainable aviation fuel available, which is the most important thing. Prove the case. Show that it's possible. Establish logistics like we did in San Francisco, where we were the first ones actually introducing sustainable aviation fuel into a common pipeline. Moving to Japan. All those things we did together with our partners, because again, this is a partnership business. Aviation relies on partnership and joint solution, and that's what we have. What we have here is the direct stakeholders in the aviation industry.
What you don't see here is the corporates, and I was talking about that earlier. Corporates are playing a more and more important role in our business here. We have developed a product, a product that helps the corporates to reduce their business travel emissions. As I said earlier, for real. No offsets, but really buying the SAF. We put a lot of effort in making sure that this business model is watertight. The solution is aligned with the SBTi guidelines to provide the pathway to reportable emission reductions. It showcases what power a partnership with the right partners in the aviation ecosystem could have.
We are very proud to announcing that we did that and tested it already with the Boston Consulting Group funding the SAF and then let their preferred airlines in the Nordics, which has been SAS and Finnair, uplifting and burning the fuel. You see me very optimistic for the future. It's a business that is growing. We are very well positioned. We are in the middle. We are in the center of gravity. We are the largest supplier. We have production. We will be growing. We will be driving our partnerships. Again, it's partnerships with airlines, with the suppliers, but I said also with corporates and other channel partners. Very proud of having one of the strongest sustainability teams maybe in the world.
Also do we have colleagues in public affairs that do have a real good understanding of what to do, and to moving the regulatory framework into the right directions. Also important to making sure that the reporting requirements for our customers are fully met. Rest assured, we will not rest in bringing new innovations, new ideas, be it on the corporate, on the voluntary market, but also on the airplane market, on the supply chain, into the market to making sure that we will stay to being ahead of the crowd, making use of our first-mover advantages, and hopefully surprising you with one or the other good news also on the next Capital Markets Day. Thank you very much.
Thank you, Thorsten. We have some excellent questions from the online. Starting with Sasi from Morgan Stanley asks, "More recently, we have seen European-U.S. majors, including Chevron and Shell, announcing aggressive targets for SAF capacity by 2030. What would you say is Neste's biggest competitive advantage compared to these companies?
Sasi, very good question. I have to say, not unexpected. I was just presenting what our biggest advantage is. We are the first mover. We know our customers. We have a very strong team that knows exactly what to do, how to react, how to partner up. On the other hand, I'm not really worried about the competition, which I told you last year already because the market is growing. The potential is there. Actually, I welcome competition because obviously there is something we did perfectly right in the last 18 months that we now have competitors copying what we're doing.
Good. A clarifying question. Peter Low asks, "What is an opt-in scheme? Can you run through how these work briefly?
Yeah, sure. Opt-in scheme is where there is an obligation to fulfilling the renewable mandates. You can do that various ways. Typically, it's done on the renewable diesel side with my colleagues, but also renewable aviation can opt into existing system and get the respective incentives from that. The credits, as we say.
Good. Mehdi from Bank of America asks, "You keep highlighting that the HEFA technology is the cheapest one. Why some of your competitors are looking for other technologies? Is it in order to avoid a feedstock supply bottleneck?
No, I don't think so. I think there is also solutions needed. We are the most advanced on HEFA, so one could maybe assume that people think don't go the way Neste is going because they are so well advanced already. As you know, it takes some time until you're there. As said, there's not only the HEFA pathway open for the future, there's various pathways that need to be explored. They decided maybe to go another way, which is also a good choice, but not for the short term, more for the longer term. All the pathways we are also working on and exploring as well.
Good. Kerttu Kupiainen has a question on a bit on the operations and our optimization. "Might you or would you ship SAF from Singapore to Europe or the U.S.?
Yes. It's all about the LCA value. Actually, the question is very good. We just did it the other way around, just to give you an example. We shipped from Europe to Japan. I was talking about Japan and we shipped a vessel there and got a certified LCA value of almost 90%, exactly 89.7%. That tells you that the shipping portion is playing a minor role in the overall LCA value discussion here, which is important because I hear that argument very often. It's not really an argument. It works that way. We would, yes.
Good. Kimmo Syväri has a question. "How do you see the regulations of use of renewable aviation fuel to develop in terms of mandatory use to react to climate change and larger market for SAF, specifically in Asia?
Well, as said, Asia is developing. As I mentioned earlier, I see New Zealand, Australia, but maybe also Japan, looking into what the European Union is doing, thinking about a mandate. For me currently, it looks like more they will go that way rather than the way of incentives and opt-in schemes as we see that in the U.S. New Zealand is already making an approach, I'm sure the rest of that region, of the new center of gravity of aviation will follow.
Thank you. That was the last question for this session for Thorsten. Let's welcome on stage EVP of Renewable Polymers and Chemicals, Mercedes Alonso.
Good afternoon or good morning, good evening, ladies and gentlemen. Mercedes Alonso, Executive Vice President of Neste, and responsible for the Renewable Polymers and Chemicals business unit. Last year, we introduced you to the expansion of Neste's sustainability promise into the plastics and chemicals industry. Driven by the growing concerns of the citizens and population towards the plastic waste challenge and climate change, we had seen how brand owners were responding by committing substantial resources and creating concrete action plans and pledging to replace their products with more sustainable solutions. If anything has changed in the last 18 months, it's the speed and the scope of the response of the plastics and chemicals industry to support the brand owners to fulfill those pledges.
We have seen many more brand owners joining these market leaders into their fulfillment. We are seeing that this segment growth is on an accelerated adoption rate and is expanding globally in a multitude of markets and applications. As last year, we were also discussing how we were seeing the demand growing. This year, we will be then looking at how Neste is leading the creation of a circular bioeconomy and what does it mean and completely translate into a tangible opportunity for this business unit. Let's go and take a look and see effective examples on how this accelerated adoption rate is looking like. In 2019, our partner, LyondellBasell, ran for the first time a production of polyethylene and polypropylene based on Neste renewable hydrocarbons. Since then, we have developed 18 active partnerships across the globe. In Europe, we continue working with LyondellBasell or companies like Borealis.
Also in Asia, for example, with companies like LG Chem in South Korea or Mitsui in Japan. Brand owners in the selected 10 industry segments that we are collaborating with have started incorporating these materials produced with our Neste renewable solutions into their applications. For example, a company, Cofresco, from the Melitta Group, has been already since a while successfully commercializing a cling film with a content of up to 35% renewable or recycled materials. In the automotive industry, for example, we have seen products based on polycarbonates for Covestro already being in use. Also in the home and personal care, more and more renewable and recycled solutions are used by companies such as Unilever or Henkel. One of the examples that I like most about, and describes very well this accelerated adoption rate, is the case of LG Chem.
Only in June this year, they had the first production run with our materials in South Korea. Already in August, they were able to announce that a company in Jordan had already taken these super absorbent materials and used them to create a baby diaper based on renewable materials. Normally, when you introduce a product in the chemical industry or a plastic, it takes up to two years to convert. The fact that our materials are what we call a drop-in solution demonstrates that one can replace one by one the crude naphtha with virtually no changes in the production assets of the polymers chemicals or in the processing industry and the parts that needs to be made until we end up having a baby diaper.
This means that the companies today can fulfill their pledges on becoming more sustainable and delivering sustainable products already today, not in five or 10 years from now. We continue also to make progress in chemical recycling. Since our first trials in the manufacturing plant in the refinery in Finland, we have been able to process the equivalent of the waste plastic generated by 20,000 average employees in Europe. Well, last year we were talking about the demand that it was being created based on the demand of these brand owners and the pledges. We were estimating how we converted the plastic and chemicals ratio that we were seeing potentially converted to renewables. The fact that we are already talking about the replacing of naphtha allow us to have a much better view on what is the potential business and more concrete numbers for Neste.
Let's take a look about this naphtha market. The naphtha demand for petrochemicals is projected to grow to over 300 million tons by 2030. We see a higher adoption rate in Europe following the regulatory efforts that are shaping up in the last 18 months, starting with the European Plastics Pact, the Green Deal, Green Recovery, and more recently, the Fit for 55 package. Also, in the largest market that is today producing the largest amount of polymers and chemicals, we see Asia. We're seeing a fast-growing market as it's in an example of the companies that we're working today, and we see that being addressed already now.
Based on the collaboration that we have with our companies and colleagues in the brand owner space, we have a clear line of sight of the potential addressable market for Neste. We assume that after 2030, the Renewable Polymers and Chemicals business unit, as well as all the renewable and recycled hydrocarbons, can see an addressable market well in excess of 100 million tons. The reason why it's also clear. While the energy and transportation sectors amount of 55% of the global greenhouse gas emissions, the materials industry, like steel, cement or chemicals, account for the other 45%. Using scientific data and studies of life cycle analysis, for example, making a simple plastic polypropylene cup, we have been able to demonstrate that one can replace over 80% of the fossil resources with renewable materials on making these kind of products.
It is easy then to see that with this huge addressable market potential, there is enormous amount of millions of tons of greenhouse gas reduction that the material space can also contribute towards climate change and mitigating the effects. We have talked about what is this accelerated rate of adoption and the size of the market. Let's take a look now on how is Neste leading this transformation and this creation of a circular bioeconomy, and how we are also the preferred partner for many of these large brand owners and companies. First and foremost, we are appreciated for what we call this double circularity, which is the heart of our value proposition. Neste has been working already since over two decades on replacing fossil resources by using waste and residues in the production of renewable materials.
The fact that we have been already working for two decades in this give us the reputation and the credibility which these brand owners can relate to and can also feel attached to. As I said before, these are drop-in solutions, it means that also in the same way that the materials can be used directly in the same assets, they are also equally recyclable in the same systems that we see today. Neste bringing also now with chemical recycling, the ability to expand the amount of waste plastics that we can be processing and preventing that they end up in incineration or in landfill is what closes this second leg of the double circularity we were talking about. In the chemical industry, we cannot decarbonize. Carbon is at the core of all the materials and everything that surround us.
What we can do and we are doing with chemical recycling, is closing the loop and making sure that the carbon is kept in circulation over and over again. Another clear advantage as well is that we have a dedicated business unit that is working relentlessly to bring these solutions to the customers. The fact that we have already now a substantial global capacity available in Asia and Singapore, or with our plants in the Netherlands and Finland, so that we can cater to the needs of these global leading brands. Having a very talented and experienced team is also helping to closing the loop and being able to address multiple different projects in different markets and applications, and being able to bring results already now. One of these collaborations, which we are very proud of, is the partnership with Unilever to replace virgin fossil carbon.
Together with Neste, Unilever committed as one of the founding partners to the Renewable Carbon Initiative, in which also they have said that the home and personal care business will be fossil fuel free by 2030. They are talking about the carbon rainbow. This is a way of showing how many different sources of carbon, be it bio-based, waste plastics, algae, or in future also power-to-liquid, all come together to replace more and more the virgin fossil carbon they are using and fulfilling their pledge of being complete carbon free in the next few years. Together with Neste, we are working in projects with Unilever, very concrete, some of them that have a short time as to deliver results already in one year.
Some others in which we will be working together to develop technologies that will help us bring in results in the next three to five years in areas not only like plastic packaging, but also in the ingredients in their surfactants. Before closing, I wanted to also bring you a brief update on how we are progressing with chemical recycling. Despite the pandemic and the fact that the teams cannot be working together face-to-face, we are absolutely on track to deliver on our promise of processing over 1 million tons of waste plastics by the year 2030. We have continued after the first trial in December in our refinery in Porvoo to run further larger scale trials, and those products have been delivered to polymers and plastic producers, and are at the moment being evaluated for further commercialization.
Together with partners like companies like Ravago or REMONDIS, we have been looking at expanding the waste plastics that we can use in chemical recycling and preventing those for ending in landfill or in the incineration. Our investment with Alterra Energy is allowing us to work together with them to create a robust, efficient, and safe technology ready for deployment. On that sense, we are progressing towards deploying this first commercial waste plastic liquefaction plant together with a partner in Europe. To wrap it up and in a nutshell, I think that we have shown you clearly a progress and acceleration of the adoption of renewable solutions in the chemicals and polymers industry. The delivery of drop-in solutions to producing partners and brand owners is enabling them to act now on a global scale.
As we said also, in chemical recycling, we are progressing very well to move to an industrial scale production with recycling partners in the very near future. Thank you very much.
Thank you very much, Mercedes. Now questions from the audience. Nick from Exane asks, "How much can you scale up your chemical recycling technology? Do you see the device being positioned alongside mechanical recycling plants?
We're positioning chemical recycling as a complementary technology to mechanical recycling. The capacities are probably going to be around 50,000 tons-100,000 tons each plant, but they don't need to necessarily be on the same site.
Okay. Sam asks, "How would you compare the voluntary market for renewable plastics to SAF? Are consumers more or less motivated?
It's a very good question because we often talk, Thorsten and I. The chemical industry and the polymer chemical industry is already a voluntary market. In terms of comparison, I think that we have seen that brand owners and consumers are determined to avoid plastic waste and bring climate change solutions to the chemical industry already now, without any legislative support.
Good. Henri Patricot has a question: "What is the main barrier to scaling up this business today? Is it recycling technology, economics, or something else?
I would say exactly as you say, economics. At the moment, there is quite a price differential with naphtha, so we need to work more on solutions that we're also making, fossil crude products, for example, less subvention, and legislation is moving into that direction. We expect that expansion to happen in the next couple of years.
Good. George from Barclays has a question: "Where do you see the highest barriers to entry in the renewable and recycled naphtha markets? To what extent do the potential returns differ between these two different ways of producing Neste RE?
Well, as Peter said in his presentation, we can foresee that this business could be well at 20% of the total capacity of Neste by 2030, which means that it's itself also competitive and attractive an opportunity for Neste compared with the other markets. As the higher barrier to entry is, again, the fact that it's a new product, that there is some logistics and some logistic topics that need to be addressed, of course the willingness of customers to select brands that have sustainable solutions versus just going with the standard ones.
Very good. Matt Lofting from JPMorgan has a question: "Can you expand on what you mean by double circularity and why it's potentially significant as a source of value creation?
Thank you. Yes. In essence, the amount of naphtha you have seen is over 300 million tons in the future. If we are going to be able to replace more and more to tackle down the climate change problems associated with materials, we need to look at all solutions. The brand owners working with us see that Neste is already posed to do a direct replacement of fossil crude with waste and residues, with waste plastics, and also in the near future, renewable polymers and chemicals can be used in materials coming from our innovation platforms. The double circularity of today, it shows that Neste is one of the unique companies that is having both solutions already now, already deployable.
Good. Jason has a question: "What type of premium price are you getting for your renewable chemical product compared to chemical commodity prices? How does the processing cost compare to traditional chemical manufacturing?
The processing cost remains pretty much the same. There might be some changes in terms of having a storage of our materials if they want to be segregated from fossil fuel resources, but the processing costs are the same. The premiums that we see over naphtha, they are basically around three to four times the price of naphtha today.
Thank you very much, Mercedes. This was the last question at this stage. Let's welcome on stage EVP of Renewable Road Transportation, Carl Nyberg.
Good afternoon, ladies and gentlemen. My name is Carl Nyberg, and I'm leading the Renewable Road Transportation business at Neste. Let's shift gear and move to the road transportation part of our business. The road transportation sector is where our renewables business really has been started and through where we have been building the business from the beginning. It's a business that we have been building over the past decade, and growing to a market which is about 7 million tons today. We have also been building our business and our global model along to serve exactly this business and as a market leader. Going forward now, this market will be growing at an accelerating pace. We see that over the next 10 years, we will be reaching a market size which is more than 30 million tons.
This is a very exciting business to be in, and we are well-positioned as a market leader and a first mover to continue winning in this business. Let's first start to have a look at what kind of progress we've had over the past year. Over the past year, we have been continuing to build our global business model. We have been serving customers in almost 30 countries across the world. We have also been busy in further expanding our Neste MY Renewable Diesel global network. This year, we entered the Belgium market, and we reached almost 600 stations worldwide that we are offering Neste MY in now. A very important milestone that we had this year was also the partnership that we made together with OKQ8 in Sweden.
For the first time in history, we are now moving our branded fuels under the canopy of another fuel retailer's stations. I believe that this really marks a significant shift in the value of how the market is seeing the value of our branded fuel as a solution, but also the Neste MY brand as itself. We believe that this will really open up new avenues to further expand the branded offering and the fuel globally. This growth of the network, as well as our vast network of channel partners, has also enabled us to serve more than 4,000 B2B customers worldwide. As Peter was saying in the beginning, despite of the pandemic, we have had great progress over the past year in continuing building on our global business model and coverage in the market.
Let's now go into a little bit to see how actually this market now will be growing in the coming years. As said, we will be seeing a growing market that will reach more than 30 million tons by 2030. This is a significant change from our perspective that we had one year back in the previous CMD, where we were projecting volumes to exceed 20 million tons. What has happened? We have seen now a significant change in how programs are being built up in North America and Europe. For instance, in North America, we are now seeing an increasing amount of LCFS programs being introduced. Washington State recently passed a bill, and we are now seeing also things happening on the East Coast, in New York, for instance.
We are also seeing things happening in Canada, pushing towards lowering the emissions of transport and combating climate change. Of course, with the change in administration, we are also seeing a much stronger push in the same direction with the Biden administration. If you look at Europe, the Fit for 55 package that came out earlier this summer is now also raising the overall level of ambition. In the Fit for 55 package, you see a number of elements that is steering towards higher demand of renewable fuels. For instance, the ETS specifically for the transportation sector, but also the Effort Sharing Regulation will be driving demand higher than previously assumed. In addition to this, we are also seeing interesting elements like the Annex IX, Part A-based products, creating new interesting opportunities for us in the European market.
We are of course, seeing also some of the member states going much further, much faster than the European level, which will also drive demand in Europe. Not only in North America and Europe are we seeing things happening now. As well in South America, we are seeing things happening in Brazil with the RenovaBio program, for instance. We have also had some cases in Japan, as well as in New Zealand where there are programs being developed. What about renewable diesel demand then beyond 2030? To really understand that, I think I need to go a bit deeper and have a look at how the diesel demand will develop. Looking at the road diesel demand growth for the coming decade, it is clear that it will be growing significantly. We will reach 880 million tons per annum by 2030.
Out of that demand, about 70% will actually come from commercial road transportation. This is also the reason why the demand is so resilient. While we are seeing private cars, passenger cars being electrified at an increasing pace, electrification of heavy duty remains difficult. We will see hydrogen entering the scene as well, but also that will take time. Building green hydrogen production, building infrastructure to supply hydrogen to the truck fleet will take time, and hence, 90% of the truck fleet will be diesel-based still in 2030. For us, that is, of course, good news. 85% of the trucks today are already now certified for Neste MY Renewable Diesel, meaning that we have an excellent solution that enables this segment to decarbonize without changes to the infrastructure or the fleet in use. Let's a little bit then talk about how do we actually address this market.
As mentioned, we have been building our global reach with our network stations growing. We have a strong network of distributor partners operating in North America and Europe. We are able to reach out to a vast group of customers, and specifically, typically the heavy-duty customers. We are well positioned. In terms of our solution, it is also a very intuitive solution that enables a fast switch to a low-carbon fuel without any changes to the fleet or the infrastructure. This, combined with our strong track record in producing and marketing sustainable renewable fuels, makes for a very good position in serving this increasingly growing segment, which are looking to decarbonize to help customers reach their climate targets. In addition to this, we are also now working on different collaboration concepts.
We are, for instance, working with IKEA to help them reduce their customers' carbon emissions by supplying renewable diesel to them. With IKEA as well, we see a lot of opportunities to come with a holistic offering and cross-selling together with our colleagues in renewable polymers and chemicals, as well as renewable aviation. We have also been developing circular concepts for cities and brands. One such example is the Fries for Miles concept that we did together with McDonald's and HAVI, taking used cooking oil from the McDonald's restaurants and turning it to Neste MY Renewable Diesel that can be used in the HAVI trucks transporting for McDonald's. We see a lot of opportunities to create these kind of exciting concepts. What does this then mean in terms of business results? Our global model has been a very important part in driving business performance and margin.
Peter was talking in the beginning already that we have been moving our margins from being around $400 to now being a healthy level between $600 and $700 per metric ton. Despite raising up feedstock prices, this has been very stable, and despite pandemic and other situation, we have been able to steer this business in a very efficient way with an excellent supply chain steering, as well as very strong market intelligent pricing capabilities, as well as our strong customer-focused approach, creating value for our customers, combined with the branded offering. To summarize then, we are well positioned to win in this exciting and growing market in the long term. Our branded platform is an excellent way to communicate towards the end customers and understand what the end customers are needing through our data-driven efforts.
With this, we will be able to create more awareness about our solution, about renewable diesel, and create demand for it. With the increased customer intimacy, we are also able to better connect with the customer through the end customer insights and create solutions and offering that is actually customer need based, and therefore also create more value. Finally, with the global model, with our global optimization, and with our very strong understanding of the different markets, we are well positioned to continue to drive margin creation and value through optimizing between different market with flexible business models. With these words, it summarizes my part, and I welcome any questions. Thank you very much for listening.
Thank you very much, Kalle.
Thank you.
Question from the audience: Can HVO produced from soybean oil compete in Europe?
That's an excellent question, actually. As you know, many of our U.S. competitors are focusing very much on soybean oil. Our focus has been on waste and residues, and that remains in our focus, while we're of course looking also at other potential solutions. We believe that waste and residues will be a strong value proposition for us in Europe.
Good. Question from Mehdi. For how long do you expect the renewable diesel market to remain tight in Europe?
That's an excellent question. Of course, when we have a market that is growing at this kind of pace, it's clear that we will have fluctuations along the years. The kind of build-up that we're seeing now in production, it is more or less synced with the demand growth as well. We see actually that the coming decade will be very much-balance like we are seeing today as well. We believe that we will be well-positioned to drive value and strong margins also in the coming years.
Good. A bit continuing on the supply-demand balance. Nick has a question: Have you run the supply-demand balance analysis on a greenhouse gas emissions basis? Does that show a bigger difference between supply and demand? I don't know how we
We become very specific then, but we have a number of ways of steering the mandates and the regulation in Europe and North America, and the greenhouse gas-based mandate is one such approach. Of course, when we look at our supply-demand models, we are taking into account the different types of requirements that are set in these different markets. I would say that we have taken into account and I would say that we very much believe still that we see a balanced market from that perspective.
A question on Neste MY from Nick. I felt like the importance given on Neste MY had declined. He refers to the earlier target we had. Has something changed?
Well, margin optimization remains in the core of what we are doing. At the same time, I think it's important to realize that what I was saying as well, that we have the Neste MY platform to also be able to communicate and drive demand for our solution. From that perspective, the brand plays an important role. We also believe that over time, the branded offering will be a source of additional value creation. It plays an important role, but still, what is in the core is the margin management and driving the business performance today.
Good. Sasi has a question on the technology development. Does the increasing adoption of trucks run on hydrogen in the 2030s mean a declining market for renewable road transportation post-2030?
Well, I would put the perspective that the heavy-duty sector will be growing over the coming 10 years, and I do believe that it will be growing after that as well. We still have so much fossil diesel in the pool, so there will be room for all the low-carbon solutions. I definitely believe that we will see an increasing demand for renewable diesel, despite the fact that we will see probably electrification to some extent and hydrogen, as well as probably some other low-carbon solutions as well. I remain confident that this market will be growing into the '30s, '40s, and probably maybe even into the '50s.
Thanks, Kalle. This concludes this part. We may now take a short break and come back in five minutes. See you soon. Welcome back, everybody. Please welcome our next speaker, Executive Vice President of Renewables Platform, Matti Lehmus.
[Break]
Ladies and gentlemen, it's a pleasure to be here and give you an update on our progress in driving growth in our feedstock and production platform. If I reflect back on the last year, it's been an exciting year for Neste. While the whole environment has been characterized by the COVID pandemic, we have made tremendous progress in our feedstock and production platforms. I would actually like to start this presentation by giving you a short update on the progress we have made in the last 18 months since the last CMD. Let me start with operational excellence, which is a core part of our strategy. I note that we have had very good performance in safety. I'm also noting that our reliability, our operational availability, has continued to be very good throughout this period. What has been very important has also been the continued focus on capacity creep.
When I look back, in 2018, our nameplate capacity was 2.7 million tons. Last time when I spoke at CMD, we had 3 million tons, and we have now reached 3.2 million ton nameplate capacity. This means we have actually, without significant investment, added 500,000 ton of capacity over the last four years. This is an important part of our operational excellence. Let me turn to the continued expansion of our feedstock platform. Our target here is very clear. We want to grow the range of feedstocks. We want to strengthen our position in the value chain by also moving upstream. If I note some of the milestones that we have achieved during the last 18 months, I have to say I'm very pleased with the progress.
I note, for example, that our waste and residue share in our feedstock pool reached 92% in the first half of the year. I also note that we have made great progress with a number of acquisitions, whether it's Mahoney, whether it's the Count Terminal acquisition, or recently, the announcement of the Agri Trading acquisition. I'll talk about these more in detail later. The third area that I want to highlight when reflecting about the progress is that also the deployment of our production growth strategy has clearly advanced. While we have of course been continuing the very important construction of the Singapore expansion project, I also want to highlight two other milestones that we have reached. The first one was the acquisition of the Bunge Loders pretreatment facility, which will play an important role in developing our pretreatment capabilities going forward.
The other one, also a very important milestone, we made a decision to invest in a SAF optionality project in Rotterdam and are currently in execution phase for this project. I will be happy to talk more about our strategy execution in these areas, but before doing that, I would like to give you overview of the macro environment. When we look at renewable diesel, sustainable aviation fuel, and renewable polymers and chemicals demand outlook, it is clear that we see a very robust long-term demand outlook all the way until 2030. Like you could hear from my colleagues, we see this same robust demand outlook, whether it is in road transportation, whether it is in aviation, or whether it is in renewable polymers and chemicals.
If we pull the demand outlook together, we currently see that the 2030 demand will grow to more than 40 million tons, which is clearly higher than what we, for example, estimated in our last Capital Markets Day. I would also say that we clearly see that the demand could reach 50 million tons in 2030. What is driving this very strong demand outlook? It is really a combination of a high ambition in both Europe and in North America. We have seen that, for example, in Europe, the Renewable Energy Directive has been transposed into national legislation. We have seen in North America new states adopting low-carbon fuel schemes. Lately, if you look at sustainable aviation fuel, we see clear development, for example, in Europe, considering the adoption of a European-wide scheme ReFuelEU.
In the U.S., the possible adoption of different incentive schemes such as a BTC scheme for aviation. Clearly signs that in both main regions, the ambition is growing. At the same time, there is also drivers beyond this regulatory ambition that will create demand potential and, for example, the voluntary markets discussed both for aviation and renewable polymers, or, for example, new regions such as in Asia-Pacific could drive that demand growth. Let me turn my view to the supply side. What is also clear since the last CMD that we have seen a big number of announcements for new projects, and we have seen the supply growth accelerating.
When we combine our model, which takes into account all the different announcements, but also puts then a certain likelihood to the different projects, we come to the conclusion from this model that supply growth will be clear in the next midterm period until 2025. We also come to the conclusion that it looks quite balanced with the demand growth that we are predicting. Here it's, of course, good to note that when we look at supply, we will see changes to this model. It is very likely with these large projects that you will see delays in some projects. At the same time, some of the projects which have been classified as unlikely may actually materialize. This is, of course, something that needs to be continuously followed.
If I turn back to the long-term demand outlook, there is actually a very important third message on this slide, and that is that the demand outlook looks very robust, not only until 2030, but also it is going to be very robust beyond 2030. This, in turn, means that also new process technologies will be needed to support the long-term growth. This is, of course, one of the very important reasons why also we as Neste are putting a lot of effort into our new business platforms in parallel to developing the HVO platform. Let me now move from this macro view to look at the waste and residues more in detail. When we update our view on the global waste and residues availability, we currently expect it to grow to 40 million tons by 2030.
You will note that when I compare this to the view we presented at the last CMD, we have actually increased our outlook from the 35 million tons that we mentioned at the time. What is driving this growth? It is, in our view, the fact that as we have a global feedstock platform, as we are more closely seeing the development in different regions, we are now also identifying some streams that we didn't have in our previous estimate. When updating our view, we come to the conclusion that we expect global availability to be growing towards 40 million tons. What can then drive the waste and residues availability beyond 40 million tons is, of course, that we need the collection, the aggregation to develop, especially in those regions where it's currently not yet developed.
There is also another important message on this slide, and that is that when we look in the long term, we also see feedstock categories that have substantial growth potential beyond the 40 million tons. I want to here just mention two examples of such categories. The first one is novel vegetable oils. This is vegetable oils from advanced agricultural concepts such as intermediate cropping, such as crops growing on degraded land, which have a zero or very low indirect land use impact. While not today being available in large quantities, it's clearly a category where we see substantial long-term growth potential. Another example would be lignocellulosics, municipal solid waste, PTX. These are examples of technologies where we need actually new technologies, but they will then open new raw material sources, which again grow substantially the feedstock pool in the long run.
Let me now move to what Neste has been doing in our waste and residue strategy. The Neste waste and residue strategy is focused on growing and expanding the access to different waste and residue streams globally. It means that we are growing both in existing markets, but we are also growing in new markets. If I look back at the year, I can see that we have made very good progress in Europe, in North America. Also, I want to highlight that in the last few years, the development we have seen in China, in Australia to develop our aggregation network, to grow the number of suppliers has been tremendous. This is a very important part of our waste and residue supply growth.
The other one that I want to highlight is that we also see an important role to move upstream in the value chain to strengthen our position in the waste and residue value chains. Again, it's an area where I take an example. The acquisition of the Mahoney platform last year and the subsequent organic growth, combined with bolt-on acquisitions to also inorganically grow this platform, has been a great example how we have been strengthening in the used cooking oil collection. Let me take two examples how this waste and residue growth strategy shows in practice. The first one is that our share of waste and residues has grown to a record level in the first half of 2021 and reached 92%. It actually was as high as 93% in the second quarter.
What we continue to see being the biggest waste and residue categories is animal fat waste, used cooking oil, and residues from vegetable oil processing. The second one I want to highlight is that our palm oil share reduced to approximately 7% already during the first half of 2021. This again shows how the trend we have been driving in the last few years continues to lead to lower and lower share of palm oil. Let me now move to two examples, two deep dives of what we are doing to drive our waste and residue position. The first one is that we have been strengthening our global aggregation network. During the last year, we have actually opened 10 new terminal locations in Europe, in Asia, in North America.
In parallel, we have made decisions to establish feedstock hubs in both Europe and in the U.S. for our most important waste and residues. In Europe, it was the acquisition of the Neste terminal at Rotterdam, which created a platform that we can expand. In the U.S., we have made long-term partnerships to create such hub in the U.S. Gulf. Why is this so important? Logistics capabilities are important for a number of reasons. First of all, it enables us to grow our supplier network. We already today have more than 400 suppliers in 2020. Secondarily, it improves the reliability of our feedstock supply. In a year of pandemic, we were able to run our system without any logistics bottlenecks, which is very different from some other industries.
Thirdly, of course, it's a very important platform to optimize our logistics cost as we can move from non-bulk to bulk at the right location. Let me move to another example, this is more about moving upstream. It is the recent acquisition of Agri Trading, which is one of the leading waste and residue traders in the U.S. Why is this such an important move for Neste? It fits into our strategy for two reasons. First of all, Agri Trading has a broad access to a number of different waste and residues in significant volumes, including animal fat, used cooking oil, technical corn oil, brown grease. There are clear synergies with the Mahoney platform. I also want to highlight here that Agri Trading actually comes with very good capabilities for logistics in the U.S. A nationwide network of transloading sites, of railcar, and truck capabilities.
For example, having more than 300 railcars in their system. This is a very important capability also for the future. Let me now summarize our feedstock strategy. It rests on 4 pillars. The first one is the continued organic and inorganic growth in our existing markets. The second one is the continued expansion by entering new markets. This could be, for example, in the future, our focus areas, examples could be India, South America. A 3rd very important element is the diversification into challenging feedstocks. Why is this so important? First of all, because there's a clear customer preference and a regulatory preference for these type of advanced feedstocks. Secondarily, it's again an area where Neste can differentiate from other players because we combine the global commercial capabilities with very good technical capabilities for treating these challenging feedstocks.
Finally, I want to highlight that we put a big focus on the development of novel vegetable oils from advanced agricultural concepts because we do see the importance of these longer term. If I turn this into clear strategic ambition, I would highlight two things. First of all, we target a palm oil share to reach zero by end of 2023. Secondarily, we want to grow the share of novel vegetable oils and other low ILUC feedstocks post-2023. I would now like to still move to give you an update on our production platform growth. I'm happy to state that we have made very good progress with our production platform development. I would obviously start with the Singapore expansion because this is a milestone, a cornerstone of our growth strategy.
We will be reaching 1.3 million tons of capacity starting up by the end of Q1 2023. That will come with the optionality to produce up to 1 million tons of sustainable aviation fuel. While it has been a difficult environment in the pandemic to run a large construction site, I'm very happy to state that we have made good progress, and we are currently on track to start up by the end of Q1 2023, and also maintain the CapEx forecast of EUR 1.5 billion. The other project that is a very important part of our growth strategy is the Rotterdam Sustainable Aviation Fuel project. Again, after the investment decision, we have made excellent progress in the construction, and we are on track to complete this project by the end of 2023.
A very important third example is the engineering work we are doing on the Rotterdam world scale unit. We are currently in the definition phase for this project, which means that we are completing the engineering, getting more accurate cost estimates, and in practice, we have made good progress, and we are on target to reach the maturity for the engineering phase and the readiness to make then a final investment decision in early 2022. I also want to highlight one more thing from the production platform. We are very committed to the target of reaching carbon neutral production by 2035, and we are currently in the process of defining the exact roadmap how to get there. There are already first elements. We have made progress in moving towards 100% renewable electricity share. We are also having a green hydrogen pilot in Rotterdam.
It is our clear target to develop this roadmap and to reach carbon neutrality by 2035. Of course, as part of the process, even evaluate if this can be accelerated. Let me now come to a conclusion. I'm very proud of our feedstock and production platforms, and I hope that with this presentation, I have given you a good overview of the progress we have been making in our strategy execution. In particular, I hope that it has given you a good insight into how this unique platform enables us to differentiate from our competition and hence create value in the future. With this, I would be happy to take any questions you may have.
Thank you, Matti, for the presentation. Wide area and a lot to cover. A lot of questions here as well. Question from Michael. Can you talk about what you have included in the supply upside? Does the supply model include recent news from the international oil companies of new projects in Europe and Canada?
Yes. Thank you for the question. The way we built this supply model is that you could see a dark green bar, which basically covers all the investments where we have an information that actually an investment decision has been taken. The upside on top of that we indicated, actually takes into account projects which are not yet having an investment decision, and those we have categorized with certain likelihood. Some of them have been categorized high probability, others middle probability, others low probability. This is the way the model has been built. For the concrete projects, which have been announced also recently, we have been taking them into the model, but then applying this methodology I explained.
Good. A feedstock question from Chris. How important is UCO and animal fats in the feedstock mix, and how will this be impacted by the hard cap the EU recently put on this feedstock? Can you easily shift to alternatives?
Our feedstock mix today covers a broad range of different waste and residues. Animal fats, used cooking oil, and residues from vegetable oil processing are the biggest categories to date. These are also categories we continue developing together then with opening new sources such as challenging feedstocks. If you look at the proposal that the EU has been made, we see that there are still caps included in the proposal. We feel it is important that there is a broad enough feedstock range so that that can support the high ambition that has been set on the product side.
Good. A specific feedstock question. What is the most promising feedstock under Annex IXA by total volume and cost competitiveness? When will feedstocks under Annex IXA become more significant than other feedstocks, including vegetable oils and UCO?
This is an excellent question. What is typical for the Annex IXA is that there is actually a variety of different feedstocks that have been listed on this list. There is, for example, acid oils, there is algae oils, there is municipal solid waste. So I wouldn't at the moment take 1 of them to be the main category. From our perspective, we are looking at a number of different alternatives and trying to develop the volume growth and accelerate the volume growth in all of these.
Good. A question on the supply side. After the wave of conversions in the U.S. comes to an end, are we going to see more greenfield? What does that mean for competitive behavior and pricing?
If you look at the number of announcements that have been made in the last few years, and especially in North America, many of them, most of them have actually been retrofits. I think it's something time will show whether there are new announcements. It will be, for me, primarily also a question of how much feedstock there is available to support even further projects.
Good. Another feedstock question. How does the regulator classify the novel vegetable oils?
Novel vegetable oils, clearly we see them as a category of oils which come with a very good greenhouse gas reduction potential. As it's a new category where we are currently in the stage as an industry to pilot solutions to scale them up, it is also something where the regulatory status then still needs to be confirmed in a number of member states, for example, in Europe.
Another one on novel feedstock. What is the earliest you could commercialize a novel feedstock? I guess one of them.
Again, very good question. If I think of the process of introducing this kind of new feedstock, it typically means first selecting a crop, a technology. It means piloting. It means building up the value chain, and then it's of course about scaling up. This is something that does not happen overnight. Obviously, we do have an ambition that first sets would be available in the midterm future.
A bit wider question on biofuels. Considering ethanol has questionable net environmental benefits, do you think the entire ethanol market could be displaced by next generation renewable fuels?
ethanol, for me, is a solution, which is of course tailored for the gasoline market. Here, of course, also, I'm sure there will be development about other solutions for this market. Neste focus has been on developing solutions, in particular for the renewable diesel, the aviation market, the renewable polymers and chemicals market, including naphtha.
Good. A question on the availability. What's the availability of waste and residues today, I guess, compared to 2030?
It's something where I don't have a fully accurate number, but we would estimate it to be somewhere around the 35 million tons. Again, by developing the aggregation, by developing the collection, we expect that to grow towards the 40 million tons by 2030.
Thanks, Matti. This concludes this part. Now let's welcome on stage our last speaker, CFO Jyrki Mäki-Kala.
Thank you.
Good afternoon from Finland. I'm Jyrki Mäki-Kala. I'm the CFO of Neste. You have now heard and seen the presentation concerning Neste group strategy, but also about renewable product units. It's my pleasure now to talk about the financials. I'm not going to go through the last 10-year financials, don't worry. You know those as well as I do. I'm just going to focus on two financial topics and also one special item about Neste Excellence. I'm going to focus on the cash flow, and I'm going to focus on the strong balance sheet. Why these two? These are very important as these are truly the enablers for us in Neste to execute our strategy. That's basically kind of a starting point for my presentation. Let's start with the cash flow. On the left you see here a KPI called cash conversion.
This basically tells you how much out of our comparable EBITDA we have been able to deliver as cash. This cash means how we basically have financed our capital expenditures, financial expenses, and also like taxes. If you look the five-year history going back, you'll see that as an average, we have delivered 95% of our comparable EBITDA as cash flow. This has been a very important thing because at the same time, our net debt has been basically zero. Our leverage has been basically zero. We have basically financed our operations through our cash flow. That's why cash conversion and cash is also very important for us. If we look the right side of the presentation of this slide, here I'm trying to describe what it means for us when we talk about strong balance sheet. We have 1 financial target.
It's called that we like to be in the leverage below the 40% level. This graph, especially talking about 2020, it tells you that roughly staying below the 40% leverage, we could take roughly EUR 4 billion debt to execute our strategy, we will still be below the 40% leverage. I think that one additional to this material is really that this year, 2019, we basically released our first green bond in March, EUR 500 million, and we could have easily done EUR 1.5 billion. That's why strong balance sheet is important going forward. Remembering also that both of these things, both cash flow and also the strong balance sheet, they are in our hands. It's up to us what we want to do with this. Let's look little bit closer about the cash allocation
We have a very simple cash allocation strategy and policy. We either invest on growth and at the same time keeping our shareholders happy. It's two items, invest on growth and shareholders. If you think about this year, 2021, we have slightly changed our guidance concerning our capital expenditures, excluding M&A, from EUR 1.2 billion to a level of EUR 1.1 billion. Nothing dramatic.
It's more about prioritizing and also a little bit about the Singapore expansion ramp-up is a little bit slower because of the COVID-19. If you think about the period 2016-2020, we have basically increased some EUR 3 billion, and also at the same time increasingly lately on the M&A, like the Agri Trading as an example. This year, basically, we are investing in CapEx organic way and also inorganic with M&A, roughly EUR 1.4 billion. Cumulatively, during this period, basically EUR 4.4 billion overall with activities around the growth.
It's truly a change if you look the earlier years in this period, especially 2016 to 2018. Like Peter and also Matti earlier discussed about the M&A, we have basically finalized more than 10 different acquisitions during the last two years, and most of these during the COVID-19 period, where we are also integrating these units to Neste. I would say that we have a very nicely oiled M&A team. We then move to the other side of the cash allocation strategy, talking about the shareholders. We have the dividend policy, minimum 50% of our comparable earnings per share that we have kept and certainly continue to do so. Overall, if you look this graph, you see that it's very balanced cash allocation between the growth, meaning CapEx and M&A, and dividends. This is the way how we look our cash.
If we go to our investments, you'll see this graph. It's really like a hockey stick. We are investing for our future. We are coming from EUR 400 million level per annum to the level of EUR 1.1 billion. More important, if you think about the renewable products, basically our growth engine. In the beginning of this period, it was roughly 20% of our total CapEx. Now it's 60%. Strategy execution continues, and of course, here you'll see very clearly the impact of the Singapore CapEx, especially now 2019 to 2021. Oil product is a little bit different story. Oil product CapEx today is more focusing on safety, productivity, reliability, and certainly with maintenance. Roughly it is EUR 250 million-EUR 300 million a year. Of course, this year more as we had the Porvoo big turnaround.
Like mentioned earlier, OP's strategic position is to manage their own cash flow. That's how they basically invest for their future. We have all earlier also mentioned that our group overall CapEx for the next few years, it will be EUR 1 billion euro minimum. This is without M&A. The strategy execution continues as it is basically seen important for Neste. This is basically kind of the way how we are looking for cash and how we are looking the strong balance sheet. Now let's look the next one special topic, Neste Excellence. I'm happy here to say that really we are updating our targets for next year and also certainly then for 2030. We introduced this Neste Excellence in our Capital Markets Day roughly 1 and a half year ago, and we have done a lot.
What it really means, just maybe kind of recap for all of you who is listening and seeing this material. We are talking about things, how we are improving our long-term performance. It's not about short-term. It needs to be sustainable, and it needs to last for minimum, let's say, 3 years, and it needs to be auditable. This is really about how we are ensuring the business transformation and growth. Basically, at the end of 2020, on a cumulative level, basically 2019 and 2020, we reached EUR 237 million. Examples coming out of renewable products, capacity creep, talking about the catalyst development work, talking about the oil product restructuring that started basically last year, like Naantali closure as an example, et cetera. This is truly something that is for the whole Neste organization. That is important that this is a thing that certainly continues.
That's why we are very happy to see that for next year, 2022, on a cumulative level, we are saying that we are at the level of EUR 350 million improvement. 2030, we have raised the target to a level of EUR 500 million. This story continues. The final slide, maybe to wrap up what I have just said, four items to remember. Strong cash flow, strong balance sheet. They are enablers for us to execute our strategic roadmap. We are focusing on investing inorganic and organic way as well. We are not changing our financial targets. It is ROACE minimum 15, it is leverage below 40. Finally, with the dividends, it is the same policy, minimum 50% of the comparable earnings per share. Overall, the song remains the same. Thank you.
Thank you, Jyrki, for the presentation. A question on the next Neste Excellence program. Does it include capacity creep and that kind of things?
Absolutely. I think that is one big thing coming out of our renewable products. Like we have said that our capacity is today 3.2 million ton and when we started on Neste Excellence, it was 2.7 million ton . Certainly, that is big part of this achievement, what we have basically made.
Good. You already referred to the dividend policy, coming from the background that we have a very strong balance sheet and basically are in net cash position, is there any room to maybe increase the dividends?
Let's say that at this point, this minimum 50% is the policy, and certainly this is then up to the board, et cetera, to think about going forward. 50% is a nice, solid dividend, what we are basically delivering back to the shareholders.
Very good. I think thank you, Jyrki. Next, you have a possibility to ask questions from all the speakers who will come on stage. If you would like to ask a question, you can find the call line instructions on the webcast platform. When calling, you will be instructed by the operator. Let's start our Q&A. Now we would be ready for the questions. I hand it over to the operator. Thank you.
Thank you. Our first question comes from the line of Michael Alsford at Citigroup. Please go ahead. Your line is open.
Hi, there. Thank you. Good afternoon, and appreciate the presentation. I've got a couple of questions, please. Firstly, you've successfully delivered on what you call a healthy margin of around $600-$700 a ton for renewable products. As you look over the medium term, I know there are a number of drivers for strong demand growth, but also the change in mix towards SAF and polymers, but also the risk of potentially higher feedstock costs. Could you perhaps comment on your views around and confidence on maintaining this range going forward? Is my first question. Secondly, Neste's always been an early mover in whatever it's done historically. However, you referenced the strong demand growth in renewable diesel, but also sustainable aviation fuel in North America, and within that I include U.S. and Canada. You've got no production capacity there.
Does that not put you at a bit of a big disadvantage relative to local players that are building capacity in that region? Therefore, would you consider both new capacity or even a retrofit opportunity in this region going forward? Thanks.
Good questions, Michael. Let me take the first question, maybe I hand over the second question to you, Matti. Of course, we are not giving any guidance. No surprise to you either. Of course, we're defining $600- $700 as a healthy margin, and we're developing also the optionality in our business model so that we can also in the future navigate if one market would not be as attractive compared to the other market, which is pretty much what we have been doing. I said in my presentation, we move from the $400 or $500 towards the $600, $700. We'll continue to do the same, let's say, and focus on getting the maximum out of our business, of course. Matti, second question.
Thank you. The second question was on North America. How I look at it, I went through it in my presentation. We are really proud about both the global feedstock platform that we have and also the global production platform that we have. The idea of these platforms is that they are global by nature, and it enables us to be competitive in all the main markets. It's clear at the moment we have very significant growth projects on the table with the Singapore expansion, with the Rotterdam SAF optionality project, and obviously the engineering for a European world scale plan. Our focus is obviously now on making sure we make good progress on these projects.
Thanks, everyone. If I could squeeze in a follow-up, there's been always a lot of speculation around whether you'd look to spin off your oil refining business, but it's also, to me, in the way that you presented and looking at the future, that it's quite core in the way that you're looking to develop key parts of your strategy, such as, I guess, chemical recycling, et cetera. Could you perhaps comment on whether you'd consider the spin-off, and if not, why not? Thank you.
Good question. Of course, again, and we've done quite a lot already on divestitures on one hand side and then acquisitions on the other hand side. I was about to say that in my final remarks, that, Michael, that the company today is not the same as the company as it was three years ago. We have selected that on the oil product side, we have a chance, that that business can be turned in one of the most sustainable refineries globally. We set as a target the most sustainable refinery in Europe. We've done the first step by the rationalization.
Naantali has been closed. We've reduced about 350,000 tons of CO2 emissions with that measure. Now we are focused on the implementation of co-processing net zero by 2035. What does it mean in Scope 3 emissions?
Thanks, Peter. I'll hand it back.
Thank you. Our next question comes from the line of Peter Low at Redburn. Please go ahead.
Okay, thanks. On the Renewable Polymers and Chemicals, you plan to grow a substantial business in that area by 2030. At the moment, there are no specific capacity plans. I think initially you'll use byproducts of the RD production process. Over what timeframe might you look to add capacity designed specifically to produce renewable naphtha? The second was just, you updated on 2021 CapEx guidance today. Could you give any indication of what level of CapEx you expect in 2022 and onwards to deliver the growth that you've outlined this afternoon? Thanks.
Yeah, let me take the first question just for clarification, then Jyrki is going to answer that question on CapEx. It's very clear to understand that in the Polymers and Chemicals business, the molecules, the drop-in molecules that Mercedes was referring to that we're selling in that market, they are, for example, biopropane. Here it's an upgrading of a gas stream that we have, a renewable gas stream. It is the quality of renewable naphtha, but it is also a middle distillate component that we have. These are the naphtha and the middle distillate components, they are products that currently we are producing. We are producing them in our Singapore facility. We're producing them in the Rotterdam facility. We are already today going with those molecules into the market. We don't need to have specific capacity that is only dedicated to Polymers and Chemicals.
Remember, our business model is focused on having that full optionality. Yeah. Singapore facility will be able to serve sustainable aviation fuel, renewable diesel, as well as middle distillates, renewable hydrocarbons that are drop-in solutions in the steam crackers, in the polymers and chemicals chain. If we go to Jyrki on the second question on CapEx.
Yeah. Thank you, Peter. I a little bit opened the window in my presentation concerning the coming years. Like we are seeing the views today is that we are going to spend in CapEx is a figure that is EUR 1 billion plus. That is basically our view today.
Thank you both.
Thank you. Our next question comes from the line of Nick Konstantakis of Exane BNP Paribas. Please go ahead.
Hi, guys. Thank you for the presentation. Got a few different topics. Starting on innovation, what do you think is the probability that one of the technologies you want to commercialize is actually featuring in your plan after Rotterdam? Can you give us an idea of where you think the economics are today? Does it need to get competitive with NEXBTL to be sanctioned in a plant? Secondly, on the feedstock market, you're a clear leader. Can you give us a rough idea on you doubled your suppliers are now 400. What is the proportion of integration that you have? What proportion, what percentages is vertically integrated? I guess thinking about the long term and the new players, can you discuss a bit the mechanisms you have in place with some of your suppliers so they don't switch over to what they're selling?
Lastly, and apologies for the long questions, can we expect a step down in your feedstock cost on a like for like basis once Singapore pretreatment starts up? You only have 1 pretreatment plant at the moment. You're adding essentially 2 more with Singapore. Does it also open up new feedstock categories? Can you just remind us a bit around that? Thank you.
Well, Nick, sorry, but can you repeat your first question for me?
Yeah, absolutely. I'm saying on the innovation and the technologies you want to commercialize, do you believe this, by 2030 probably means that it will feature likely on the plant after Rotterdam? Can you just discuss a little bit the economics with where they are today and where you want to get them?
I guess a different way to ask this is, when you say commercial, at industrial scale, does it have to be competitive with NEXBTL in terms of dollar per ton or whatever metric?
Yeah, let me take that question. On the waste and residue, Matti, if you can take that as well as then on the third question with regards to the pretreatment. As I said, in the innovation business platforms, of course, we are looking today very broadly, and we are not excluding anything. Yeah. There may be technologies in the future whereby the waste and residue costs are extremely low. Yeah. Then your process technology is extremely expensive. We always look at the entire business case to then make up our minds. As you remember, IRR, we want to have 15% as a minimum target. That's how we are looking at these different technologies. From today's perspective, of course, we continue to also develop our NEXBTL technology. It's not set that the next investment will be in a new technology.
It could be still a NEXBTL technology. We're not yet at that point whereby we have taken a decision if it will be one, if it will be two different types of technologies, and how the scaling up eventually would go. Something that is a bit more concrete is going into the liquefied waste plastic. As Mercedes explained, we are now ramping up. We have already done quite some tests in an industrial scale. The amount of the waste that 20,000 European people are having in terms of plastic waste per year. That is already substantial. Here, of course, we are now looking at, okay, what could be then the next step after repeating, of course, the industrial scale trials in terms of an investment strategy. Matti.
I'll answer the question, Nick, that you had on the waste and residue and how we can ensure that we have long supply relationships. I think it's a very good question, but as it's quite fundamental, I look at it a little bit like on the sales side, Kalle talked about customer intimacy. In the same way, it is very important for us that we build strong supplier relationships. If you look at practical ways how to ensure that long-term relationship, there is a number of different ways we can do it. One is, of course, the reliability of our needs. This is very valuable for many of our suppliers as we have such a large system behind it. Secondarily, I talked about the importance of logistics.
This is actually whether we think of trading capabilities that we have acquired, or whether we think of actual terminal network buildup. A big element of it is that there is also the flexibility to receive on-time products, and this is highly valued by our suppliers. The third element that makes Neste, of course, if you think of our feedstock strategy, very unique, is that we also have a lot of flexibility in our production system when it comes to different feedstock qualities. Again, a valuable partner for our suppliers to have that flexibility. It is really through all these elements that we are building that supplier relationships. On top of that, of course, we have had acquisitions like Mahoney, where we really move into the collection. That is then complementing that approach.
Your second question was on the pre-treatment question. It comes actually again at the core of the feedstock strategy when I said that one of the pillars is that we focus on challenging feedstocks, both because there is a customer preference, but also because we feel that we have good set of capabilities to really find technical solutions also to convert these challenging feedstocks. It is then really through having already today very sophisticated, advanced pre-treatment, but also with our new project like Singapore, not only adding new capacity, but at the same time also again improving the quality of that pre-treatment. It is really through both avenues that we want to grow that window when it comes to feedstock quality.
Thank you, guys.
Thank you. Our next question comes from the line of Erwan Autret of RBC. Please go ahead. Your line is open.
Hi there. Thanks for taking my question, and thanks for the wonderful presentations. I've got two questions, please. One on the U.S. and one on feedstock. On the U.S., there's speculation around lower renewable volume obligations for 2020, 2021, but also potentially 2022. Does it make the U.S. potentially less attractive longer term? I guess the other question is that, is there flexibility to sell out of California if LCFS prices decline? That would be my first question. My second question is on feedstock. We've seen the current feedstock base, animal fats, rapeseed oil, vegetable oils kind of move together. The question is longer term, how the future feedstock base at Neste help mitigate price inflation risk? These are my two questions. Thank you.
Let me take the first one, and that was a question, of course, as expected. Then Matti, again.
Yes
if you take the second question. As we said in the presentation, and hopefully we were able to demonstrate that with some facts that we brought to the table, is the North American markets, and I'm not just saying the U.S. market, but the North American market will continue to be highly attractive. We see that the Biden administration is really going into that direction, is looking at what is happening in Europe, is defining their own measures, and so on and so on. We do know there is lots of speculation now going on on the short term on the RVO volumes. We need to see how that will evolve. That speculation. It's still unclear, despite the fact what you can read in the newspapers or online.
Generally spoken, you see what is going on in terms of road transportation, what Kalle talked about on LCFS credit mechanism systems, the expansion, beyond California, Oregon, British Columbia, et cetera. In addition to that, federal systems, discussions around prolongation on the BTC for road transportation, discussions around SAF incentive, and so on. We are quite convinced that the North American market will be a very attractive market. Matti.
Thank you. On the feedstock question, I think we come actually to the core of our feedstock strategy. The pillars that I talked about, it's about global platform, having global reach to different waste and residue streams. It is also about a broad range of feedstock. Then thirdly, it was about developing our pretreatment capabilities to have that flexibility for different qualities. I still see these are, especially looking into a tight feedstock market, all of these are extremely important elements that help us differentiate, but also that help us then untap value potential.
Thanks so much, Jyrki. Thank you.
Thank you. Our next question comes from the line of Joshua Stone at Barclays. Please go ahead.
Thanks, good afternoon. Two questions please. One on the dividend. Can I just press you a little bit further on that? You cut the dividend last year based on lower earnings. 2021 looks like net income will be down again. Is the implication we should expect another dividend cut, or would you be actually willing to just lift that payout ratio a bit further to protect that dividend level you're paying out? Second question. Jyrki, you talked a lot about the sort of EUR 4 billion of room before you hit your leverage target. Does that highlight maybe an appetite to do large scale acquisitions? If so, generally just on your acquisition strategy, which parts of the value chain are you likely now to target? Thank you.
Yeah, very good questions. Jyrki, if you want to take the first one. Of course, I can make a comment on that as well. Yeah, we have our dividend strategy. Jyrki explained we are not changing the dividend strategy. Maybe Jyrki, if you can also add to that.
Yeah, I think that's a good question. Thank you, Joshua. It's really that we have the dividend policy. Like we have said, it's a minimum of 50% of the comparable earnings per share. Certainly that is up to what kind of comparable earnings per share you have. This is the policy, and that is how we see the world as we see it today.
Maybe also the second question, Jyrki, if you can take the second question as well.
Our, let's say, capacity of taking external debt. I think that was kind of the example why I wanted to raise it, that we have this element. Cash flow is in our hands, and we see also that if we want to raise capital from the market, it's in our hands. I'm not talking about specific target, et cetera. It just illustrates that the strategy execution is not about funding.
Yeah, to that, I said it also in my presentation. We have a lot of growth opportunities in our markets that we are seeing. We are spending quite a lot in terms of CapEx. In fact, the question also before, you see EUR 1.1 billion is probably going to be the spending for this year. With the plans that we have in place, that seems to be also a quite robust number, maybe also for the future. Need to wait, of course, until we take the final investment decision on the European facility. If you look at the co-processing on one hand side, and if you look at Singapore on the other hand side, we want to pay, as Jyrki said also in his presentation, very good dividends in addition to that.
Of course, if we see the opportunities, I mentioned it, to go more upstream in the waste and residue side. We're just signed on the Agri Trading side. That's one acquisition that we're now proceeding with. Also, if we see that in our technology evaluations, if there is a platform, and if we want to do an equity investment or an acquisition in that area, these are the kind of things that we are mainly focusing upon right now.
Okay, thank you.
Thank you. Our next question comes from the line of Sascha Kamshuk of Morgan Stanley. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. I have two, please. The first one was related to the pace in which you can actually increase your capacity. Assuming an FID is taken on the Rotterdam expansion, and the project starts in 2025, it appears that there is a difference of around two to three years between the delivery of two greenfield NEXBTL projects. Is that representative of the pace at which Neste can increase capacity organically, or can this be accelerated? Does the timeline for the design and construction of a greenfield project increase if it's not an expansion facility? The second one was related to the global supply and demand outlook that you presented. When I look at 2025, it seems like Neste's market share could actually be 33% or lower in 2025. Just wanted to check, is that something that you're kind of comfortable with?
Yeah. Let me take again the first question. Then I need to look at Matti. You take the second one. I could look at Kalle as well to take the second one. Yeah?
Sure.
On the first question, we talk about our Singapore investments. We have huge investments ongoing right now. In the Rotterdam facility, there are two projects currently ongoing. We've talked about the SAF optionality investment, we have an investment ongoing on wastewater treatment. We are looking into Porvoo. I talked about the co-processing. I talked about the net zero, gave a couple of examples what is in that scope. We have a lot on our plate. Don't forget, we have 5,000 people in our company. That's the focus that we currently have to deliver on those investments and deliver in the right way in those investments. I do not like to now speculate what will be the next one and how much time will it take for the next one.
The way how we are approaching is we come from today, we look at the bottom up, what are the projects that we can do.
That's what we are delivering. Instead of saying, "Oh, you know what, we make a big promise that we are going to be in 2030 with X million tons of capacity," then we have difficulties on how to get there, eventually, you change then your words and so on. That's not our culture, that's not our company. One small comment also on the greenfield. It's clear if you have an existing facility that you have, of course, a lower risk profile if you build your capacity or a new line on an existing site compared to if you have to deploy, let's say, that capital in a completely new site. That takes, of course, always more time. Yeah. One can easily say that takes one, two years, more. Matti, supply and demand.
Thank you. Yes, and there was the question on the market share. How I look at it, like you have heard today, we are obviously, according our strategy, working on both opening new markets like aviation, like polymers and chemicals. We are at the same time growing in RRT. At the same time, we are developing our feedstock platform and the production platform to support that growth. For me, what is important, I think that ambition we set already some time ago, that our impact on greenhouse gas reductions is at a minimum 20 million tons by the end of the decade. I think we are well on track, and that is clearly something we are focusing on to reach that target.
The market share, I would more perhaps see it as something that as the market demand outlook is very robust, that perhaps underlines the opportunities that there are to grow in this market.
Thank you.
Thank you. Our next question comes from the line of Matthew Lofting at JP Morgan. Please go ahead.
Great. Hi, everybody. Thanks for the presentation and taking the questions. Two if I could. First, just capital allocation. I think you talked earlier about a minimum of EUR 1 billion CapEx per annum for the coming years. Can you just clarify whether that includes M&A, i.e., it's an all-in number, or whether any continued M&A moves could be additional? Also just expand on the capital allocation across the businesses within that balance. I think you referenced the minimum 15% hurdle rates earlier. Is that what you're pivoting around or in particular, as you allocate more capital to sustainable aviation and chemicals related activities over the coming years? Are there more holistic metrics that you're using to support that?
Just a quick second one, in the context of decarbonization and in particular, looking to decarbonize the value chain, what are some of the biggest challenges that you see around that process for the coming years? Thank you.
Yeah. In terms of capital allocation, you mentioned the EUR 1 billion per year. That does not include mergers and acquisitions. We're clearly talking about steel and iron, building up our own facilities. The way we look at the capital allocation between the business units, if I'm talking about now the renewable business units, you know how the setup is that we have in the organization, and you know what the model is that we are running in terms of our production facilities. That means that what we are building has full optionality. That means that therefore we have with Matti, under his responsibility, we have the platform. In the platform we are deploying and we are trying to build every time, like in Singapore, that full optionality, because we don't know how fast a polymers and chemicals market will develop.
We don't know how fast a sustainable aviation fuel market will develop. We don't know where we will, in the future, capture the best margin. Therefore, we believe that the right business model to run is having that full optionality so that we actually can maneuver, and then we can continue to optimize our margin like we have done successfully during the last years. There is one exemption to that rule, and that is when we are really talking about chemical recycling. When we talk about chemical recycling, of course, we would have to deploy capital that is dedicated to what we want to achieve, that dual value proposition that Mercedes was talking about to the polymers and chemicals chain, because that's where it makes sense, to build up that full circularity and get the benefits out of it.
Thank you. Our next question comes from the line of Jason Gabelman of Cowen. Please go ahead. Your line is open.
Hey, thanks for taking my questions. I first wanted to go back to feedstocks. I appreciate you're building out a platform to access more feedstocks globally. Do you see a risk to the margin benefit you're getting from running lower cost feedstocks that are priced at a discount from vegetable oils, just given increasing competition for those feedstocks globally and probably having to go further to access the feedstocks? Further along those lines, how big of an issue, if at all, is the Annex IX, Part B limitations on feedstocks? Is that something that you have the ability to mitigate the risk of? My second question, I just wanted to ask on the Porvoo refinery, which wasn't discussed much today. How do you see the EBITDA per barrel trending in the future from where it was pre-COVID.
Do you think you could achieve the same profitability now that you've shut down the less profitable refinery, Naantali? Is the Porvoo plant potentially something that could be a divestment candidate? Thanks.
You want to take the first one, Matti?
Yes. Thank you.
I'll take the Porvoo one.
The first question was on waste and residue competitiveness versus vegetable oils. The way I look at it fundamentally is why we have focused on waste and residues in our strategy is that we fundamentally see that they have typically very good carbon reduction scores, so low carbon intensity. While I fully agree with you, in a way it's harder because you have the complexity of the collection, the aggregation, you have the more challenging technical. We also view this, obviously, as an area where with the right capabilities, we can differentiate. That is the rationale why we believe a focus on the waste and residues is the right one for us and enables us to capture value also in the future.
Okay, let me take the second question then, which was around Porvoo. Part of it, we already answered, and that is that we want to make Porvoo the most sustainable refinery in Europe. That's currently the focus of our people. Identified more than 80 different projects, and we are now in the evaluation on what project comes first because of course it goes hand in hand, not just with how we run the facility, but also with certain investments, just for example, green hydrogen, electrolysis, carbon capture and storage, and so on. The question around the profitability, I think we all know that the pandemic is not over yet, so we continue to see high volatility with regards to reference margins. Needless to say, these days, that electricity prices have skyrocketed. That is also valid for Finland. Needless to say, that hydrogen prices have skyrocketed.
Generally spoken, energy prices, they have skyrocketed. What will be the effect out of that? How long will that take? Will it normalize? Will there be measures from the politicians being taken in Europe to level that out? We don't know. Yeah. What we do know is we need to run this very efficiently. The refinery in Porvoo, it's one of the best net cash margin refineries in Europe with that very high complexity that we have there, and we want to make it the most sustainable refinery in Europe.
Thanks. Is it possible just to sneak in one more? What's the sensitivity on gas prices to the renewable diesel business?
It also does definitely play a role because on one hand side, of course, we are using to produce our renewable diesel, we are using hydrogen. We want to get to green hydrogen in the future. Currently, it is, of course, fossil-based hydrogen because there is no green hydrogen available. Electricity is not so much a cost element in the production of renewable diesel. Yes, it does have an element, but we have a pre-silent call tomorrow, and I'm looking in the direction of Jyrki, that will then brief on where are we standing with the current quarter.
Thank you very much.
Bye.
Unfortunately, the time is up. I'm sure the discussion will continue on other forums. Thank you very much for your excellent questions and active participation. Now it's time to wrap up and move to Peter's concluding remarks.
Very good. We are now at the end of our 2021 Capital Markets Day, and some concluding remarks from my side. This company, Neste, is not the same company as it was three years ago. We have about 40% of our people have been, so to say, exchanged because we did quite a lot of streamlining of our portfolio. We did a consolidation in the oil products business. We sold certain parts that we considered not strategic for our strategy, Renewable and Circular Solutions. Jyrki talked about more than 10 acquisitions that we did. In addition to that, we hired people in building up the business units, Renewable Aviation, Polymers and Chemicals along the supply chain, as well as in innovation in different parts of the organization.
We're still the same amount of people if you look at it and compare it to three years ago, but that 40% that we have exchanged are now people that are highly experienced in the renewable and circular solutions. They're experts that we have in the company. That means that that shift that we have made is really going into supporting the strategy. We've had very good progress in strategy execution. You see the result out of that, and I hope that you are convinced about it as well during this presentation with a couple of elements that we were able to explain to you. This successful transformation is not over. Yeah. We will continue to look at how can we further develop the entire portfolio of the company. We have excellent growth opportunities for the current and the future businesses.
Let's not forget, it is all about waste and residue. It's not about steel and iron. What kind of waste and residues? What is the carbon intensity that you have for your waste and residues, do you actually have access to waste and residues? That's where we believe we are the global leader, we are not standing still, we will continue to expand. That leads strong value creation, with a purpose of creating a healthier planet for our children. Thank you for your attention and all the very good questions, hopefully we will see you again soon in person. Thank you.