Renewable diesel producers usage at 77%, greatest given that July - AEGIS

Biodiesel producers usage 89% in Oct, greatest since June 2023

Better credit costs, more powerful diesel demand stimulated greater activity - analyst

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

Renewable diesel producers made use of 77% of their overall operable capacity in October, the highest since July 2024, the data showed. Biodiesel plant utilization increased to 89%, the highest considering that June 2023.

Rising usage rates and improving margins are a welcome relief for the biofuels market, after operators sustained a rough start to 2024 as need development 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 providers based on government incentives such as tax credits. Among the 2, sustainable diesel has actually become the preferred fuel for suppliers, as it reaps much better rewards and can substitute diesel completely.

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 almost 19% year-over-year to 4.58 billion gallons in October, the EIA data showed, as the majority of new biofuel plants opened in the past three years were tailored towards it.

Still, oversupply pressed eco-friendly 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 enhanced primarily by a surge in the value of credits required for compliance with federal biofuel mandates, stated Zander Capozzola, vice president of renewable fuels at AEGIS.

D4 Renewable Identification Numbers, issued for biodiesel and renewable 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 said.

Margins were also assisted by more powerful demand for diesel, which struck a 1 year high in October, raising rates for both the traditional 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., also rose from below 60 cents each in Sept to over 70 cents each in October, according to AEGIS.

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