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

Biodiesel manufacturers utilization rate struck 89% in Oct, highest since June 2023

Better credit rates, stronger diesel need stimulated greater activity - expert

NEW YORK, Jan 3 (Reuters) - U.S. sustainable diesel and biodiesel producers increase operations in October to multi-month highs, assisted by stronger margins for the biofuels, according to information compiled by advisory group AEGIS Hedging.

Renewable diesel manufacturers made use of 77% of their overall operable capability in October, the highest given that July 2024, the information revealed. Biodiesel plant utilization rose to 89%, the highest given that June 2023.

Rising utilization rates and improving margins are a welcome relief for the biofuels industry, after operators withstood a rough start to 2024 as demand growth slowed, leaving the marketplace oversupplied and requiring a variety of biodiesel plant closures.

Both eco-friendly diesel and biodiesel are more costly to produce than diesel, making suppliers depending on government rewards such as tax credits. Among the 2, sustainable diesel has emerged as the preferred fuel for suppliers, as it gains better incentives and can substitute diesel completely.

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

Renewable diesel output capacity increased nearly 19% year-over-year to 4.58 billion gallons in October, the EIA information showed, as most plants opened in the previous three years were geared towards it.

Still, oversupply pressed renewable diesel output capability 6% lower in October from a record 4.90 billion gallons in June.

In addition to plant closures, profitability for the market in October was boosted primarily by a surge 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 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 also helped by more powerful need for diesel, which hit an one-year high in October, raising costs for both the conventional fuel and its options, he said.

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

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