Renewable diesel manufacturers utilization at 77%, highest considering that July - AEGIS

Biodiesel manufacturers utilization rate hit 89% in Oct, highest because June 2023

Better credit costs, stronger diesel demand spurred higher activity - analyst

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

Renewable diesel manufacturers made use of 77% of their total operable capability in October, the highest given that July 2024, the data showed. Biodiesel plant utilization increased to 89%, the greatest considering that June 2023.

Rising utilization 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 requiring a number of biodiesel plant closures.

Both sustainable diesel and biodiesel are more expensive to produce than diesel, making providers reliant on government incentives such as tax credits. Among the 2, sustainable diesel has become the preferred fuel for providers, as it enjoys much better incentives and can substitute diesel completely.

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

Renewable diesel output capacity rose almost 19% year-over-year to 4.58 billion gallons in October, the EIA information 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, success for the industry in October was boosted generally by a rise in the value of credits required for compliance with federal biofuel mandates, said Zander Capozzola, vice president of renewable fuels at AEGIS.

D4 Renewable Identification Numbers, provided for biodiesel and sustainable diesel production, increased from a low of 56 cents each in September to over 71 cents in October, enhancing profitability for making the fuels, Capozzola stated.

Margins were likewise assisted by stronger need for diesel, which hit an one-year high in October, raising prices for both the standard fuel and its options, he stated.

Prices for credits under the Low Carbon Fuel Standard program of California, where most biofuels are consumed in the U.S., likewise increased from 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 said. (Reporting by Shariq Khan in New York