Renewable diesel producers utilization at 77%, greatest since July - AEGIS

Biodiesel producers utilization rate hit 89% in Oct, greatest because June 2023

Better credit prices, stronger diesel need stimulated higher activity - expert

NEW YORK CITY, Jan 3 (Reuters) - U.S. renewable diesel and biodiesel producers ramped up operations in October to multi-month highs, helped by more powerful margins for the biofuels, according to data compiled by advisory group AEGIS Hedging.

Renewable diesel producers used 77% of their total operable capacity in October, the greatest given that July 2024, the data revealed. Biodiesel plant usage increased to 89%, the highest given that June 2023.

Rising usage rates and enhancing margins are a welcome relief for the biofuels market, after operators withstood a rough start to 2024 as need growth slowed, leaving the market oversupplied and forcing a number of biodiesel plant closures.

Both eco-friendly diesel and biodiesel are more costly to produce than diesel, making suppliers reliant on government incentives such as tax credits. Among the 2, sustainable diesel has actually become the favored fuel for suppliers, as it enjoys much better incentives and can substitute diesel entirely.

Total biodiesel production capacity fell 4.2% year-over-year to about 2 billion gallons in October, according to information launched by the U.S. Energy Information Administration on Tuesday.

Renewable diesel output capability increased almost 19% year-over-year to 4.58 billion gallons in October, the EIA data revealed, as a lot of brand-new biofuel plants opened in the past three years were geared towards it.

Still, oversupply pushed eco-friendly diesel output capacity 6% lower in October from a record 4.90 billion gallons in June.

In addition to plant closures, profitability for the industry in October was enhanced mainly by a surge in the worth of credits needed for compliance with federal biofuel mandates, stated Zander Capozzola, vice president of renewable fuels at AEGIS.

D4 Renewable Identification Numbers, issued for biodiesel and eco-friendly diesel production, rose from a low of 56 cents each in September to over 71 cents in October, improving profitability for making the fuels, Capozzola stated.

Margins were likewise helped by stronger need for diesel, which hit a 1 year high in October, raising costs for both the standard fuel and its alternatives, he said.

Prices for credits under the Low Carbon Fuel Standard program of California, where most biofuels are consumed in the U.S., also rose from listed below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

"You truly had whatever rowing in the right instructions in October," Capozzola stated. (Reporting by Shariq Khan in New York City; Editing by David Gregorio)