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 retreated as stronger feedstock prices built on pullback in Nymex ULSD. Consistent gains in the LCFS markets staunched losses.
Biodiesel margins fell sharply as the soybean oil to heating oil (BOHO) spread widened The CBOT soybean oil (SBO) contract was largely unchanged on the week alongside material losses in Nymex ULSD futures.
Used cooking oil (UCO) overtook Bleached Fancy Tallow (BFT) as the highest returning feedstock last week, as BFT and distillers’ corn oil prices were the fastest gaining feedstocks.
The California Low Carbon Fuel Standard (LCFS) market rallied for a third consecutive week. LCFS strength has been driven by trader buying and strength in futures markets in recent weeks. Contango in the forward curve steepened further, particularly for Q4 2023 transfers.
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.
Record March D4 RIN generation at just under 619 million credits weighed heavily on wider RIN markets.
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.
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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