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 margins fell for a second consecutive week as losses in diesel and renewable credits outpaced retreating feedstock costs.
Biodiesel margins remained flat week-on-week though widened sharply at week’s close amid CBOT soybean oil gains. This comes after retreating off the highest levels in nearly seven months.
Used cooking oil (UCO) remained the highest returning feedstock for a sixth consecutive week, followed by soybean oil (SBO).
D4 RINs slumped as traders trimmed their positions ahead of the June 14 announcement of the final ‘Set Rule’ eyeing current oversupply in the market.
The California Low Carbon Fuel Standard (LCFS) market reversed course yet again, following a modest recovery last week. The prompt market has largely been in a choppy holding pattern since early May. LCFS strength has been driven by trader buying and strength in futures markets as the credits become more attractive options ahead of the California Air Resource Board’s new, more stringent scoping plan.
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.
Vertex Energy announced a delayed startup at its Mobile, Alabama refinery amid a failure of a feedstock pumping system. The company expects repairs to be completed by the end of May. The company had originally planned to complete the 8,000 Bbl/d plant this month and aimed to boost capacity to 14,000 Bbl/d by late 2023.
PBF and ENI’s 50/50 joint venture, St. Bernard Renewables LLC, new 306 million gallons/yr plant in Chalmette, Louisiana will begin running feedstock this month, including refined vegetable oil, DCO, and technical tallow. The pretreatment unit is expected to come online in June allowing the consumption of 1.1mn t/yr of feedstock.
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.
EPA Administrator Michael Regan issued comments at a House Agriculture Committee hearing indicating the EPA is likely to cave to both industry and lawmaker pressure to increase the advanced biofuel mandate in the final ruling.
Debt ceiling negotiations saw non-farm state Republicans look to put BD and RD on the chopping block, while protecting SAF and carbon capture projects. President Joe Biden threatened to veto the bill.
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.
Tidewater Renewables Ltd. expects to begin operations at its 45mn gallons/yr Prince George Refinery in British Columbia, Canada by Q2. The plant will ramp up to 80% nameplate capacity by the second half of 2023.
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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