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

Biodiesel producers utilization rate struck 89% in Oct, greatest because June 2023

Better credit rates, stronger diesel need stimulated greater activity - expert

NEW YORK, Jan 3 (Reuters) - U.S. renewable diesel and biodiesel producers 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 producers utilized 77% of their total operable capacity in October, the greatest since July 2024, the information showed. Biodiesel plant utilization increased to 89%, the greatest since June 2023.

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

Both eco-friendly diesel and biodiesel are more expensive to produce than diesel, making suppliers based on government incentives such as tax credits. Among the 2, eco-friendly diesel has actually become the preferred fuel for providers, as it gains better rewards and can substitute diesel completely.

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 nearly 19% to 4.58 billion gallons in October, the EIA data showed, as many brand-new biofuel plants opened in the previous three 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 increased primarily by a surge in the value of credits needed for compliance with federal biofuel mandates, stated Zander Capozzola, vice president of sustainable fuels at AEGIS.

D4 Renewable Identification Numbers, provided for biodiesel and renewable diesel production, increased from a low of 56 cents each in September to over 71 cents in October, enhancing success for making the fuels, Capozzola said.

Margins were likewise helped by more powerful demand for diesel, which struck a 1 year high in October, raising costs for both the traditional 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 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 right instructions in October," Capozzola said. (Reporting by Shariq Khan in New York City