Renewable diesel producers utilization at 77%, greatest because July - AEGIS

Biodiesel producers utilization rate hit 89% in Oct, highest because June 2023

Better credit costs, stronger diesel need stimulated higher activity - analyst

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

Renewable diesel manufacturers used 77% of their total operable capacity in October, the highest since July 2024, the information showed. Biodiesel plant utilization increased to 89%, the highest because June 2023.

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

Both sustainable diesel and biodiesel are more costly to produce than diesel, making suppliers based on federal government incentives such as tax credits. Among the 2, sustainable diesel has become the favored fuel for suppliers, as it reaps better rewards and can substitute diesel completely.

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

Renewable diesel output capability increased nearly 19% year-over-year to 4.58 billion gallons in October, the EIA data revealed, as a lot of new biofuel plants opened in the previous 3 years were geared towards it.

Still, oversupply pushed renewable 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 enhanced generally by a rise in the value of credits needed for compliance with federal biofuel requireds, said Zander Capozzola, vice president of sustainable fuels at AEGIS.

D4 Renewable Identification Numbers, issued for biodiesel and renewable 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 stated.

Margins were also helped by more powerful demand for diesel, which hit a 1 year high in October, raising prices for both the standard 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., also 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 City; Editing by David Gregorio)