Renewable diesel manufacturers usage at 77%, greatest since July - AEGIS

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

Better credit costs, stronger diesel need spurred greater activity - analyst

NEW YORK, Jan 3 (Reuters) - U.S. eco-friendly diesel and biodiesel manufacturers 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 utilized 77% of their overall operable capability in October, the highest because July 2024, the data showed. Biodiesel plant usage rose to 89%, the highest because June 2023.

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

Both renewable diesel and biodiesel are more expensive to produce than diesel, making suppliers dependent on federal government rewards such as tax credits. Among the 2, eco-friendly diesel has actually become the favored fuel for providers, as it gains better rewards and can replace diesel completely.

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

Renewable diesel output capability rose nearly 19% year-over-year to 4.58 billion gallons in October, the EIA data showed, as most new biofuel plants opened in the previous 3 years were tailored towards it.

Still, oversupply pressed sustainable diesel output capability 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 improved primarily by a rise in the worth of credits needed for compliance with federal biofuel mandates, said Zander Capozzola, vice president of sustainable fuels at AEGIS.

D4 Renewable Identification Numbers, released for biodiesel and renewable diesel production, increased from a low of 56 cents each in September to over 71 cents in October, improving success for making the fuels, Capozzola stated.

Margins were also assisted by more powerful need for diesel, which struck an one-year high in October, raising costs 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., also increased from below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

“You really had whatever rowing in the right instructions in October,” Capozzola stated. (Reporting by Shariq Khan in New York