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

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

Better credit costs, stronger diesel demand stimulated greater activity - expert

NEW YORK, Jan 3 (Reuters) - U.S. eco-friendly diesel and biodiesel manufacturers ramped up 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 producers used 77% of their total operable capacity in October, the highest because July 2024, the data revealed. Biodiesel plant utilization increased to 89%, the highest because June 2023.

Rising utilization rates and improving margins are a welcome relief for the biofuels industry, after a rough start to 2024 as need growth slowed, leaving the market oversupplied and forcing a variety of biodiesel plant closures.

Both sustainable diesel and biodiesel are more costly to produce than diesel, making suppliers depending on government incentives such as tax credits. Among the 2, sustainable diesel has emerged as the favored fuel for providers, as it enjoys better incentives and can substitute diesel totally.

Total biodiesel production capability 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 rose nearly 19% year-over-year to 4.58 billion gallons in October, the EIA information showed, as the majority of new biofuel plants opened in the previous three years were tailored towards it.

Still, oversupply pressed eco-friendly diesel output capability 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 boosted primarily by a rise in the worth of credits needed for compliance with federal biofuel mandates, said Zander Capozzola, vice president of renewable 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, enhancing profitability for making the fuels, Capozzola stated.

Margins were also assisted by more powerful demand for diesel, which struck an one-year high in October, raising costs for both the conventional fuel and its alternatives, he stated.

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

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