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

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

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

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

Renewable diesel manufacturers made use of 77% of their total operable capability in October, the greatest because July 2024, the data revealed. Biodiesel plant usage increased to 89%, the highest since June 2023.

Rising usage 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 market oversupplied and requiring a variety of biodiesel plant closures.

Both sustainable diesel and biodiesel are more costly to produce than diesel, making providers based on federal government rewards such as tax credits. Among the 2, eco-friendly diesel has actually become the preferred fuel for providers, as it gains better incentives and can replace diesel totally.

Total biodiesel production capacity fell 4.2% year-over-year to about 2 billion gallons in October, according to data launched 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 data revealed, as many new biofuel plants opened in the past three years were geared towards it.

Still, oversupply pressed eco-friendly diesel output capacity 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 improved primarily by a surge in the worth of credits needed for compliance with federal biofuel requireds, said Zander Capozzola, vice president of eco-friendly fuels at AEGIS.

D4 Renewable Identification Numbers, released for biodiesel and sustainable 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 by stronger demand for diesel, which hit a 1 year high in October, raising rates for both the standard fuel and its alternatives, 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 listed below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

"You actually had whatever rowing in the ideal direction in October," Capozzola stated. (Reporting by Shariq Khan in New York