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

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

Better credit costs, more powerful diesel demand 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 stronger margins for the biofuels, according to data assembled by advisory group AEGIS Hedging.

Renewable diesel producers utilized 77% of their overall operable capability in October, the greatest because July 2024, the data revealed. Biodiesel plant utilization increased to 89%, the greatest because June 2023.

Rising usage rates and improving margins are a welcome relief for the biofuels market, after operators withstood a rough start to 2024 as demand development slowed, leaving the market oversupplied and requiring a variety 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 emerged as the favored fuel for suppliers, as it gains much 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 launched by the U.S. Energy Information Administration on Tuesday.

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

Still, oversupply pushed sustainable 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 boosted generally 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 renewable diesel production, rose 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 assisted by more powerful demand for diesel, which hit a 1 year high in October, raising costs for both the standard fuel and its alternatives, he stated.

Prices for credits under the Low Carbon Fuel Standard program of California, where most biofuels are consumed in the U.S., likewise rose from listed below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

"You really had everything rowing in the ideal direction in October," Capozzola stated. (Reporting by Shariq Khan in New York City; Editing by David Gregorio)