Renewable diesel producers usage at 77%, highest because July - AEGIS

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

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

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

Renewable diesel manufacturers utilized 77% of their total operable capacity in October, the greatest considering that July 2024, the information showed. Biodiesel plant utilization rose to 89%, the highest considering 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 forcing a number of biodiesel plant closures.

Both sustainable diesel and biodiesel are more costly to produce than diesel, making suppliers depending on federal government incentives such as tax credits. Among the 2, renewable diesel has emerged as the preferred 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 data released by the U.S. Energy Information Administration on Tuesday.

Renewable diesel output capacity increased almost 19% year-over-year to 4.58 billion gallons in October, the EIA information revealed, as most new biofuel plants opened in the previous 3 years were tailored towards it.

Still, oversupply pushed sustainable diesel output capability 6% lower in October from a record 4.90 billion gallons in June.

In addition to plant closures, success for the market in October was improved generally by a surge in the worth of credits required for compliance with federal biofuel mandates, stated 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 said.

Margins were likewise helped by more powerful need for diesel, which hit a 1 year high in October, raising prices for both the standard 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 listed below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

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