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 were mixed as mostly stronger feedstock prices were met by persistent weakness in Nymex ULSD prices. Stronger LCFS prices and D4 RIN prices staunched losses and lifted margins for the lowest carbon intensity feedstocks.
Biodiesel margins fell sharply as stronger soybean oil prices coupled with Nymex ULSD losses. The soybean oil to heating oil (BOHO) spread reached the widest level in over two months.
Used cooking oil (UCO) remained the highest returning feedstock last week, followed by BFT.
D4 RINs rebounded on the week as buying returned to the marketplace for the first time in over half a month. 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 rebounded following last week’s pause. 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.
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.
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.
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.
Interested in receiving these updates directly to your inbox?
