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

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

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

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

Renewable diesel producers made use of 77% of their total operable capacity in October, the highest because July 2024, the data showed. Biodiesel plant usage rose to 89%, the highest since June 2023.

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

Both renewable diesel and biodiesel are more expensive to produce than diesel, making providers based on federal government rewards such as tax credits. Among the 2, renewable diesel has actually emerged as the preferred fuel for suppliers, as it reaps 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 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 data revealed, as the majority of brand-new biofuel plants opened in the previous three years were tailored towards it.

Still, oversupply pushed renewable 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 increased mainly by a surge in the value of credits required for compliance with federal biofuel requireds, 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 success for making the fuels, Capozzola said.

Margins were also helped by more powerful need for diesel, which hit a 1 year high in October, raising rates 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., also increased 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 City; Editing by David Gregorio)