Persistent volatility drives consistent uncertainty for renewable diesel and biodiesel producers. With increased regulatory action and production growth on the horizon, alongside mounting geopolitical tensions, stakeholders need a weekly insight into their operational costs and returns.
What happened?
US renewable diesel (RD) margins declined for a sixth consecutive week as rebounding feedstock prices and diesel weakness were only partially offset by stronger D4 credits.
Biodiesel margins widened sharply amid a late-week rally in CBOT soybean oil futures.
Used cooking oil (UCO) remained the highest returning feedstock for a tenth consecutive week.
D4 RINs recovered week-over-week as a deteriorating margin environment drove prices higher.
The California Low Carbon Fuel Standard (LCFS) market pressed lower for a second consecutive week.
The EPA released the final ‘Set Rule’ on June 21 with final 2023-2025 blending obligations for the advanced biofuel industry falling well short of existing capacity and out of line with scheduled expansions.
Canada’s first renewable diesel facility completed construction and will soon begin production. Tidewater Renewables’ 46MM gallons/yr Prince George Refinery located in British Columbia was scheduled to come online during the second quarter and aims to achieve 80% of nameplate capacity during the second half of 2023. Total capacity now sits at 47.55MM/yr.
May RIN Generation came in at an all-time high of 2.11 billion driven by fresh record D4 RIN generation of over 750MM credits. Domestic and foreign renewable diesel accounted for roughly 59% of total D4 generation.
Vertex Energy received federal approval to generate D4 RINs from its 8,000 Bbl/d Mobile, Alabama, renewable diesel facility. The plant is currently producing at 5,500 Bbl/d and the company aims to achieve full capacity by the end of June.
ExxonMobil exited its renewable diesel offtake agreement with Global Clean Energy Holdings as the 210mn USG/yr is running behind schedule and overbudget. The energy giant originally stated it would take such action if no product was received by July 2022. The Bakersfield, California facility is slated to run on camelina oil. Global Clean Energy Holdings rejected the notice and stated it has until 30 November to complete the project, according to the Bakersfield Californian.
Cargill announced it has put its Missouri soy crush facility on hold, citing market dynamics. The 62mn bushels per year facility was originally slated for completion in 2026.
Mining giant Rio Tinted announced it transitioned its heavy machinery to renewable diesel at its Boron, California open pit mine. This move follows a trial period with Neste and Rolls-Royce.
April D4 RIN generation slowed modestly yet held well above the top of the five-year range. D4 output was up 104MM credits on year-ago levels, or 21%. Current D4 production has already fulfilled more than three times the year-over-year increase proposed for 2023.
California’s Air Resource Board (CARB) held a workshop to discuss an “auto-acceleration mechanism” as unused LCFS credits rose to record highs. During the workshop California regulators indicated that the final scoping plan may not take effect at the start of the new year much to the disappointment of stakeholders. The regulatory body indicated that the acceleration mechanism would likely not take effect until 2H 2025.
The ASTM has approved a new low-metal content biodiesel specification called D6751. The new specification will ensure more reliable engine performance and add durability.
Marathon announced that it is on pace to complete Phase II of its Martinez Project with Neste by year end bringing total production capacity to 730 million gallons/yr. Phase I was completed during 1Q23 ramping up 260 million gallons/yr of renewable diesel capacity.
Oleo-X launched a 300 million gallons/yr feedstock pretreatment facility in Pascagoula, Mississippi. The company aims to process low-carbon inedible oils and poultry fat.
Par Pacific announced a $90 million investment to build a RD/SAF facility at its existing refinery in Kapolei, Hawaii. The facility is expected to produce 4,000 Bbl/d of RD and SAF as well as renewable naphtha and LPG by 2025.
Parkland Corp. announced its decision to halt its renewable diesel project in British Columbia, Canada. The company had been coprocessing at its Burnaby Refinery with plans to build a 273,000 gallons/yr RD facility, set to come online in 2026. The company cited rising feedstock costs and advantages to US producers afforded by new credits carved out in the Inflation Reduction Act (IRA). The move could be a harbinger of slowing momentum for the RD industry which has increasingly worried about rising feedstock costs, while the numerous advantages of the US market are likely to open export markets soon.
The Washington State Senate passed a Sustainable Aviation Fuel (SAF) tax credit, following actions from the state of Illinois which issued its own SAF credit with additional tax advantages for the fuel. Washington aims to establish a $1/gallon credit with a $2/gallon cap as additional value can be earned for fuels with lower carbon emissions. The Illinois SAF credit is set at $1.50/gallon and will run from June 1, 2023, through June 1, 2033, making the state the highest returning market for SAF.
FutureFuel Corp. is considering halting biodiesel production citing rising feedstock prices, uncertainty on the permanency of certain federal tax credits and heavy competition from the renewable diesel industry. The company owns a multifeed, 59mn gallons/yr biodiesel plant in Batesville, Arkansas.
Shell scrapped plans for a 550,000 t/yr RD and SAF facility in Singapore. While no rationale was put forth, feedstock supply and the lack of mandates throughout the Asia Pacific region are likely culprits. While feedstock prices have been falling, recession fears have also been weighing on diesel values, limiting margin growth.
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