Rising RVO driven by vast market uncertainty
Sharp gains across all RIN types that bolstered the Argus Renewable Volume Obligation (RVO) this week to all-time highs were driven by buyers wary of regulatory uncertainty and the forthcoming policy under the new White House administration.
The Argus RVO, which represents the cost of compliance with the Renewable Fuel Standard (RFS), has increased more than sevenfold since last January's 2.43¢/USG following court-ordered restrictions on biofuel blending waivers and the Covid-19 pandemic slashing both biofuel and conventional fuel demand. At the height of the pandemic in spring 2020, obligated parties were heard to even sell off RIN credits that would count toward their obligation to raise funds to stay afloat.
The Argus RVO has since far exceeded its last major rally in 2013, when it hit 13.93¢/USG, and is currently 17.17¢/USG.
Buyers now scramble to purchase credits amid a litany of unknowns, including overdue biofuel blending mandate volumes for 2021 and several ongoing court battles.
Regulatory purgatory
The biggest unknown to obligated parties under the RFS is the US Environmental Protection Agency's (EPA) proposal and finalization of mandated biofuel blending volumes for 2021. Lacking a mandate for the ongoing year, many obligated parties appear to be erring on the side of caution and buying heavily.
RFS requires that refiners, importers and certain other companies each year ensure minimum volumes of renewables blend into the gasoline and diesel they add to the US road fuel supply.
Blending requirements do not apply to exports, jet fuel or other off-road uses, such as heating and power generation.But as the domestic fuel market grapples with the regulatory uncertainty, market participants say exporting to avoid compliance costs is not as easy as it sounds.
"I'm not sure it's entirely possible for a lot of [obligated parties]," one participant said. "They just [have to] eat the cost, which is why they petition the EPA in the courts so much."
Lingering low fuel demand abroad from the pandemic would also deter obligated parties from relying solely on exporting, according to another market participant.
A lack of RVO percentage standards for the current year has also sown uncertainty in many obligated parties, leading them to go long in the market for fear of getting caught flat-footed and short on credits upon the EPA's future unveiling of blending volumes.
Whereas the EPA under former president Donald Trump passed a record number of small refinery exemptions (SRE), waiving dozens of obligated parties from the RFS, the market expects far fewer under the administration of President Joe Biden.
Additional court cases that could lead to sharp changes in the market include the 10th US Circuit Court's decision to limit the number of refineries eligible for waivers of the mandates now set for arguments in April before the US Supreme Court.
A separate court ruling compelling the EPA to tack on an additional 500mn USG of biofuel blending is also on the market's radar.
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Brazil's 3tentos cuts soy crop outlook amid floods
Brazil's 3tentos cuts soy crop outlook amid floods
Sao Paulo, 9 May (Argus) — Brazilian agribusiness company 3tentos cut its soybean crop outlook for this season because of the floods ravaging southern Rio Grande do Sul state. An important part of 3tentos' operations is headquartered in Rio Grande do Sul, the second-largest soybean producer in the country, which has been facing heavy rainfall since 29 April that has killed 107 people, according to the state's civil defense. As a result, Rio Grande do Su's soybean crop may drop to 20mn-21mn metric tonnes (t) from 23mn-24mn t previously predicted, according to 3tentos' chief executive Luis Osorio Dumoncel. At least 80pc of soybeans harvested this year are stored in warehouses or ports. "We have been working tirelessly to maintain all operations in the supply of inputs, grains, feed and biofuels," he said during a quarterly earnings call. The company sees a "tiny risk" to its supply chains of pesticides, seeds and fertilizers because of the floods. On the logistics side, alternative export routes have also been used to ship products such as soybean meal, chief operating officer Joao Marcelo Dumoncel said. 1Q results 3tentos' first quarter sales reached R2.68bn ($520mn), a 48.5pc hike from the same period a year earlier, driven by the industry, biodiesel and soybean meal segments. The industry segment, the firm's largest, accounted for R1.52bn in sales, rising by 69pc year-over-year. Soybean meal and other products' revenues totaled R927.6mn, 72pc higher than in the first quarter in 2023. Biodiesel sales increased by 64pc to R591mn, thanks to the increase in biofuel blending mandate to 14pc from 12pc since March. "We are confident that the biodiesel operation will help the company's margin this year," Dumoncel said. The firm's soybean crushing margins rose by 3.3pc in the quarter, settling at R442/t, driven by biodiesel production. 3tentos' grain sales grew by almost 27pc to R560mn. Revenues in the agriculture feedstocks segment — such as fertilizers, pesticides and seeds — reached R601mn in the first quarter, up by 35pc from a year prior. The company's first quarter income totaled R156.44mn, a 51pc increase from the same period last year. 3tentos also started to build its first corn crushing unit to produce ethanol and dried distillers' grain (DDG). The company completed the issuance of debt securities worth R560.73mn this week. By Alexandre Melo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Vertex to pause Mobile renewable fuels refining
Vertex to pause Mobile renewable fuels refining
Houston, 9 May (Argus) — US specialty refiner Vertex plans to pause renewable fuels production at its 88,000 b/d Mobile, Alabama, refinery by the end of the year, returning a converted hydrocracker to produce what it says are wider-margin fossil fuel products. Vertex completed the conversion of the Mobile refinery and produced its first barrels of renewable diesel (RD) in May last year , having bought the refinery from Shell in 2022 . The company plans to use a third quarter turnaround to convert its renewable hydrocracker back to petroleum fuels production and to be up and running by the end of the year, after facing significant macro headwinds for renewable fuels, the company said on an earnings call today. The decision to return to full fossil fuels production is ultimately a near-term financial decision for the company which has an outstanding $196mn term loan, management said on an earnings call Thursday. The time line for a return to petroleum product production is contingent on permitting approvals and a successful completion of the turnaround and catalyst change in the unit. Vertex plans to sell its renewable feedstock inventories prior to the conversion. Vertex said it will retain the flexibility to return to renewable fuels processing should market conditions improve for the fuels, but does not believe headwinds to renewable markets will abate in at least the next year and a half. Conventional crude and other feedstock throughputs at the Mobile refinery were 64,000 b/d in the first quarter, down from 71,000 b/d in the same three months of 2023. Renewable throughputs were 4,000 b/d in the most recent quarter. The company expects 68,000-72,000 b/d of conventional crude and other feedstock throughputs in the second quarter and 2,000-4,000 b/d of renewable throughputs. Vertex reported a first quarter loss of $18mn compared to profits of $54mn in the first quarter of 2023. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japanese ethylene producers unite for decarbonization
Japanese ethylene producers unite for decarbonization
Tokyo, 8 May (Argus) — Japanese petrochemical producers Mitsui Chemicals, Mitsubishi Chemical and Asahi Kasei have agreed to co-operate on decarbonization of their ethylene crackers in west Japan, targeting to decide a pathway within the current April 2024-March 2025 fiscal year. They plan to accelerate carbon neutrality at Mitsubishi Chemical and Asahi Kasei's 496,000 t/yr Mizushima cracker in Okayama prefecture and Mitsui Chemicals' 455,000 t/yr Osaka cracker in Osaka prefecture. The partners aim to introduce biomass feedstocks such as biomass-based naphtha and bioethanol and low-carbon cracking fuels like ammonia, hydrogen and electricity. They said joining forces will enable them to accelerate reducing greenhouse gas emissions, although they have not yet decided any further details. Mitsui Chemicals has experience in using bio-naphtha and recycled pyrolysis oil at its Osaka cracker. Japanese petrochemical producers have increasingly united to achieve decarbonization of their production processes, which account for around 10pc of the Japanese industrial sector's carbon dioxide emissions, according to the trade and industry ministry. Mitsui Chemicals, Sumitomo Chemical and Maruzen Petrochemical agreed to study the feasibility of chemical recycling and using bio-feedstocks at the Keiyo industrial complex in Chiba. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Doubts abound over US midcon E15 shift: NATSO
Doubts abound over US midcon E15 shift: NATSO
Houston, 7 May (Argus) — An effort by eight US midcontinent states to start selling 15pc ethanol (E15) gasoline blends year-round starting in 2025 remains unlikely, according to US fuel retailer trade association NATSO. The US approved last month the request from Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin for year-round E15 gasoline sales starting next year. But even with that approval there are many barriers to making those sales a reality, said David Fialkov vice president of government affairs for NATSO, which represents truck stops and travel center operators. This includes a lack of investment from pipelines and refiners to prepare for the changes, as well as the higher costs of separating and selling different gasoline specifications at the retail level. "I remain pessimistic that it will come to fruition," Fialkov said Tuesday at a conference held by fuel retail industry group SIGMA in Austin, Texas. Political pressure to delay or abate the change in the midcontinent states will probably continue until refiners, pipeline companies and retailers begin to make the investments necessary, said Fialkov. E15 has been available for sale across the US since 2019, but a federal court in 2021 found that the Clean Air Act offers a fuel volatility waiver to refiners to produce only 10pc ethanol gasoline. The Environmental Protection Agency (EPA) has worked around this ruling for the last two summers by issuing temporary emergency orders allowing the sale of E15 because of the war in Ukraine's squeeze on crude prices. A group of midcontinent refiners has petitioned the EPA to delay implementation of the E15 rule until the summer of 2026. The EPA has not yet ruled on the request. Fialkov said a legislative solution to the issue at the federal level would provide a clear and uniform pathway to E15, as opposed to the the EPA's rule which leaves some states still relying on the waiver and others opting to go with year-round E15. By Zach Appel Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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