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

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

Better credit rates, more powerful diesel need spurred higher activity - analyst

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

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

Rising usage rates and enhancing 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 forcing a number of biodiesel plant closures.

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

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 revealed, as most brand-new biofuel plants opened in the past three years were tailored 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, success for the market in October was increased primarily by a surge in the value of credits required for compliance with federal biofuel mandates, said Zander Capozzola, vice president of sustainable fuels at AEGIS.

D4 Renewable Identification Numbers, issued for biodiesel and sustainable diesel production, rose from a low of 56 cents each in September to over 71 cents in October, improving profitability for making the fuels, Capozzola stated.

Margins were likewise assisted by more powerful demand for diesel, which hit a 1 year high in October, raising costs for both the traditional 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., also increased 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 City; Editing by David Gregorio)