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 fell for a second consecutive week as stronger feedstock prices built on a material rout in Nymex ULSD prices amid expiry. The end of a three-week rally in LCFS credit prices, alongside D4 RIN losses eroded margins further.
Biodiesel margins were more insulated from the downward trend as losses in soybean oil prices dampened the impact of the Nymex ULSD selloff.
Used cooking oil (UCO) remained the highest returning feedstock last week, as losses in BFT and distillers’ corn oil (DCO) outpaced UCO returns.
D4 RINs fell over the course of the week as record high March D4 RIN generation and a lack of actionable headlines kept the market tracking lower. The RIN market has been soft ahead of the June finalization of blend mandates and an ample supply of credits even amid comments that the advanced mandate is likely to be raised to reflect the pace of RD production capacity.
The California Low Carbon Fuel Standard (LCFS) market halted a three-week rally as demand exited the marketplace and futures markets. The forward curve remained in contango though a flatter structure at midweek made for volatility over the course of the week.
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.
News that United Refining was denied its SRE hardship waiver by the Third Circuit court proved moderately bullish to the overall RIN complex as the move adds additional demand to the marketplace. Trade organization Growth Energy entered comments in support of enforcing SREs in its case against the EPA. A full denial of all SREs would represent more than 1.6 billion RINs.
PBF and ENI announced a 50/50 joint venture, St. Bernard Renewables LLC, to run a new RD plant in Chalmette, Louisiana. The 360mn gallons/yr facility is expected to come online during the first half of 2023 and will include full pretreatment allowing the consumption of 1.1mn t/yr of feedstock.
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.
Vertex expects to complete its 10,000 Bbl/d Mobile, Alabama renewable diesel facility by the end of this month, with production set for the second quarter. Vertex aims to boost capacity to 14,000 b/d in late 2023, an expansion originally planned for 2024.
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.
The UK received its first renewable diesel import on March 30 to Valero Cardiff following a decision to lift import tariffs on US RD. The move presages growing export opportunities for competitive US RD product.
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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