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

Biodiesel producers utilization rate hit 89% in Oct, greatest since June 2023

Better credit prices, stronger diesel need stimulated greater activity - analyst

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

Renewable diesel manufacturers utilized 77% of their total in October, the highest considering that July 2024, the data revealed. Biodiesel plant usage rose to 89%, the highest given that 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 renewable diesel and biodiesel are more pricey to produce than diesel, making suppliers based on federal government rewards such as tax credits. Among the 2, renewable diesel has actually emerged as the favored fuel for suppliers, as it gains much better incentives and can replace diesel entirely.

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 rose 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 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 industry in October was improved mainly by a rise in the worth of credits required for compliance with federal biofuel mandates, said Zander Capozzola, vice president of sustainable 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 helped by stronger need for diesel, which hit a 1 year high in October, raising costs for both the conventional fuel and its options, 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 truly had whatever rowing in the ideal instructions in October," Capozzola stated. (Reporting by Shariq Khan in New York; Editing by David Gregorio)