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

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

Better credit costs, stronger diesel need spurred greater activity - analyst

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

Renewable diesel producers utilized 77% of their overall operable capability in October, the highest considering that 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 need development slowed, leaving the market oversupplied and forcing a number of biodiesel plant closures.

Both renewable diesel and biodiesel are more costly to produce than diesel, making suppliers based on government incentives such as tax credits. Among the 2, eco-friendly diesel has emerged as the preferred fuel for suppliers, as it enjoys much better rewards and can replace diesel entirely.

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

Still, oversupply pressed sustainable diesel output capability 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 enhanced mainly by a surge in the worth of credits needed for compliance with federal biofuel mandates, said Zander Capozzola, vice president of eco-friendly fuels at AEGIS.

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

Margins were also assisted by stronger need for diesel, which hit a 1 year high in October, raising rates for both the standard 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., likewise 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 instructions in October," Capozzola said. (Reporting by Shariq Khan in New York