Renewable diesel manufacturers utilization at 77%, greatest since July - AEGIS

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

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

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

Renewable diesel producers used 77% of their total operable capacity in October, the highest given that July 2024, the data showed. Biodiesel plant usage rose to 89%, the highest considering that June 2023.

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

Both sustainable diesel and biodiesel are more expensive to produce than diesel, making suppliers based on government incentives such as tax credits. Among the 2, sustainable diesel has actually emerged as the preferred fuel for suppliers, as it reaps much better rewards and can substitute diesel totally.

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 rose nearly 19% year-over-year to 4.58 billion gallons in October, the EIA data showed, as most new biofuel plants opened in the previous three years were geared towards it.

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

D4 Renewable Identification Numbers, issued for biodiesel and eco-friendly diesel production, increased 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 assisted by stronger demand for diesel, which hit an one-year high in October, raising prices 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 below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

"You truly had whatever rowing in the right direction in October," Capozzola said. (Reporting by Shariq Khan in New York; Editing by David Gregorio)