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Feedstock imports shake up US biofuel production
Feedstock imports shake up US biofuel production
New York, 24 July (Argus) — Waste from around the world is increasingly being diverted to the US for biofuel production, helping decarbonize hard-to-electrify sectors like trucking and aviation. But as refiners turn away from conventional crop-based feedstocks, farm groups fear missing out on the biofuels boom. Driven by low-carbon fuel standards (LCFS) in states like California, US renewable diesel production capacity has more than doubled over the last two years to hit a record high of 4.1bn USG/yr in April according to the Energy Information Administration. Soybean and canola processors have invested in expanding crush capacity, expecting future biofuels growth to lift vegetable oil demand. But policymakers' growing focus on carbon intensity, a departure from the long-running federal renewable fuel standard (RFS) that sets volume mandates for broad types of fuel, primarily benefits waste feedstocks, which generate larger LCFS credits because they are assessed as producing fewer emissions. Argonne National Laboratory's GREET emissions model, which has been modified by federal and California regulators for clean fuels programs, factors in emissions sources like fertilizers and diesel use on farms for virgin vegetable oils but not for used oils sourced from cooking operations. Refiners trying to maximize government subsidies are thus sourcing waste-based feedstocks from wherever they can find them. Through May this year, imports to the US under the tariff code that includes used cooking oil (UCO) and yellow grease rose 90pc from year-prior levels to more than 1.8bn lb (844,000t). While China represents most of that, sources are diverse, with significant sums coming from Canada, the UK, and Indonesia. Imports of inedible and technical tallow, waste beef fat that can be turned into biofuels, have also risen 50pc so far this year to 800,000lb on ample supply from Brazil. While soybean oil was responsible for nearly half of biomass-based diesel production in 2021, that share has declined to around a third over the first four months this year as imports surge (see graph). "Every pound of imported feedstock that comes in displaces one pound of domestically sourced soybean oil or five pounds of soybeans," said Kailee Tkacz Buller, chief executive of the National Oilseed Processors Association. Even as LCFS and RFS credit prices have fallen over the last year, hurting biofuel production margins and threatening capacity additions , imports have not slowed. Feedstock suppliers, many from countries with less mature biofuel incentives and limited biorefining capacity, might have few options domestically. And exporting to the US means they can avoid the EU's more prescriptive feedstock limits and mounting scrutiny of biofuel imports. More ambitious targets in future years, particularly for sustainable aviation fuel, "will create a lot of competition for UCO in the global market," said Jane O'Malley, a researcher at the International Council on Clean Transportation. But for now, "the US has created the most lucrative market for waste-based biofuel pathways." Incentives for US refiners to use waste-based feedstocks will only become stronger next year when expiring tax credits are replaced by the Inflation Reduction Act's 45Z credit, structured as a sliding scale so that fuels generate more of a subsidy as they produce fewer greenhouse gas emissions. While essentially all fuel will receive less of a benefit than in past years since the maximum credit is reserved for carbon-neutral fuels, the drop in benefits will be most pronounced for fuels from vegetable oils. Granted, President Joe Biden's administration wants the 45Z credit to account for the benefits of "climate-smart" agriculture, potentially helping close some of the assessed emissions gap between crop and waste feedstocks. But the administration's timeline for issuing guidance is unclear, leaving the market with little clarity about which practices farmers should start deploying and documenting. "While a tax credit can be retroactive, you can't retroactively farm," said Alexa Combelic, director of government affairs at the American Soybean Association. Squeaky wheel gets the soybean oil The concerns of agricultural groups have not gone unnoticed in Washington, DC, where lawmakers from both parties have recently called for higher biofuel blending obligations, prompt 45Z guidance, and more transparency around how federal agencies scrutinize UCO imports. There are also lobbying opportunities in California, where regulators are weighing LCFS updates ahead of a planned hearing in November. At minimum, agricultural groups are likely to continue pushing for more visibility into the UCO supply chain, which could take the form of upping already-burdensome recordkeeping requirements for clean fuels incentives and setting a larger role for auditors. Fraud would be hard to prove, but two external groups told Argus that the Biden administration has indicated that it is looking into UCO collection rates in some countries, which could at least point to potential discrepancies with expected supply. More muscular interventions, including trade disincentives, are also possible. Multiple farm associations, including corn interests frustrated that the country's first alcohol-to-jet facility is using Brazilian sugarcane ethanol , have asked the Biden administration to prevent fuels derived from foreign feedstocks from qualifying for 45Z. The possible return of former president Donald Trump to the White House next year would likely mean sharply higher tariffs on China too, potentially stemming the flow of feedstocks from that country — if not from the many others shipping waste-based feedstocks to the US. Protectionism has obvious risks, since leaving refiners with fewer feedstock options could jeopardize planned biofuel capacity additions that ultimately benefit farmers. But at least some US agriculture companies, insistent that they can sustainably increase feedstock production if incentives allow, see major changes to current policy as necessary. By Cole Martin Waste imports crowd out soybean oil Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Malaysia’s palm oil stocks up slightly in May
Malaysia’s palm oil stocks up slightly in May
London, 10 June (Argus) — Malaysia's palm oil stocks increased slightly at the end of May from the previous month, as growth in production outpaced exports, according to data from the country's palm oil board (MPOB). Total Malaysian palm oil inventories rose to 1.75mn t at the end of May, a 0.5pc increase from April. Crude palm oil production rose by 14pc on the month to 1.7mn t, as peak harvest season commenced. Market participants watch palm oil stock levels to gauge supply-demand dynamics. Malaysia's monthly releases are tracked more closely, as data on its palm oil industry are considered the most reliable. The country is the second-largest palm oil producer globally after Indonesia. The country's palm oil exports rose by 12pc from April to 1.38mn t in May, according to the MPOB. Exports rose despite a recent increase seen in palm oil prices, which has caused its discount to rival soybean, sunflower and rapeseed oils to narrow, and has driven a decline in sales to some price-sensitive markets like India. Palm kernel production rose by 11pc on the month to 408,000t, while output of crude palm kernel oil rose by 26pc to 194,000t. Exports of biodiesel fell by 41pc on the month to 20,900t. External sales of oleochemicals rose by 10pc on the month to 257,400t, while exports of palm kernel oil moved up slightly from April to 87,800t. By Carolina Palma Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU deforestation traceability system to launch in Nov
EU deforestation traceability system to launch in Nov
Clarification: Paragraphs one, three and four have been changed to clarify the implementation deadlines for the EU deforestation regulation, after it was established that the expert's initial interpretation of the deadlines mischaracterized the situation. Argus published a clarification on 28 June 2024 with more details. London, 30 April (Argus) — The European Commission is set to unveil an information system to help with the implementation of the EU deforestation regulation (EUDR) in November, but different implementation deadlines for larger and smaller firms may constitute trading barriers in the interim for certain wood categories, the senior policy officer at industry association Bioenergy Europe, Daniel Reinemann, told the Argus Biomass Conference. The Due Diligence Statements (DDS) information system will provide a "due diligence statement number and [companies] link it" with the product they are producing and selling to trace the origin of products throughout the supply chain, as required by the EUDR, Reinemann said at last week's conference. Mandatory due diligence under the EUDR for operators and traders selling and importing wood products — among other commodities — into the EU will apply from 30 December 2024 for operators of wood products covered by the EUTR (EU Timber Regulations), applying to all operators, including small and medium-sized enterprises (SMEs). However, EUDR expands the scope of wood products that are covered and SMEs producing these new products will have until the end of June 2025 to come into compliance with the new legislation. These products include among others wood charcoal, wood wool, wood flour, tools and handles, kitchen and tableware made of wood, and other wood products. The different implementation start dates may result in challenges for trading between the two company sizes for the affected wood categories, Reinemann said. For instance, a small operator selling such products to a large company would have different levels of requirements to meet in the first half of 2025 when the small operator will not be obliged to meet EUDR requirements, he said. Some operators that lack the logistical and cost capacity to meet the EUDR requirements may decide to exit the market, but "realistically, we do not know how significant that share is", Reinemann said. The US Department of Agriculture (USDA) has previously commented on concerns over the implementation of this regulation, arguing that it could limit US wood product exports to Europe. Despite the challenges surrounding implementation of the EUDR regulation, "the accountability [it will require operators to have] will give [the public] a lot more faith in the system", Reinemann said. "The regulation will primarily impact forest owners as feedstocks are the first to be targeted," Bioenergy Europe policy director Irene di Padua said in an interview in February. The EUDR will apply to imports of cattle, cocoa, coffee, oil palm, soya, rubber, wood and their derived products to the EU. By Hannah Adler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Brazil gum turpentine exports down in 2023
Brazil gum turpentine exports down in 2023
London, 9 April (Argus) — Brazilian gum turpentine exports in 2023 fell 4.2pc year on year to 26,976t as buyers in the US and France reduced purchases amid high stock levels and softer downstream markets. Brazilian gum turpentine exports to the US declined by 61.7pc year on year to 2,440t, from 6,284t in 2022, according to data from Global Trade Tracker (GTT). France, another key market, imported 822t of Brazilian gum turpentine in 2023, a 63pc reduction compared to the 2,217t it had purchased in 2022, GTT data showed. The US was not a significant buyer of South American gum turpentine in 2023 as stocks were elevated and were bought at higher prices in 2022. The supply of crude sulphate turpentine (CST), a competing product, was also ample. France, previously the second largest buyer of South American gum turpentine, has sharply reduced Brazilian imports in the last few years. A key buyer in the aroma chemicals sector has faced softer downstream demand and high inventories, while also closing a terpene resins, wood rosin and gum rosin facility in the US in 2023. With the tightening of pine oleoresin feedstock supply in Brazil in the 2023-24 season, Brazilian gum turpentine availability and inventories have become thinner this year, suppliers said. Brazilian sellers are hopeful that volumes sold into the US will be higher this year compared with the volume the country imported in 2023. Business activity in the US has increased as buyer inventories are lower and Brazilian prices remain competitive compared to 2022 and early 2023 levels. This year, the US has imported a total of 883t in January and February this year, levels not seen since late 2022. According to GTT data, the US is the second largest buyer from Brazil after India for the January-February period this year. As Brazil gum turpentine availability is tighter and US demand into aroma chemicals started to rebound this year, prices for the Brazilian product have increased in recent months. Argus assessed Brazilian Pinus elliottii based gum turpentine spot prices at $2,000-2,100/t fob Brazil port on 1 April, up over 16pc from the $1,650-1,800/t fob Brazil port levels seen on 3 January. Japan, the third largest buyer in 2023, imported 3,126t, up by 21.8pc year-over-year from the 2,565t in 2022. Japanese imports of Brazilian gum turpentine in the first two months of 2024 are stable at 601t, the same level seen in January-February 2023. China was the second largest buyer of Brazilian gum turpentine in 2023. Before and during Covid, Chinese demand dropped sharply with purchases declining from 1,044t in 2021 to a record low of only 480t in 2022. Brazilian exports of gum turpentine to China dropped to almost zero from July 2021 because of competitive pricing from Indonesia and more expensive post-Covid freight rates. But improving shipping economics in 2023 and lower Brazilian gum turpentine pricing enticed Chinese buyers , and imports increased from the record low seen in 2022 to 4,884t in 2023. Chinese imports of Brazilian gum turpentine have been higher so far in 2024, according to Chinese trade data. China imported 620t in January-February this year, an 11pc increase from the same period of 2023. India, the largest buyer from Brazil, bought 12,509t in 2023, a slight decline from the 12,944t it purchased in 2022. With lower pricing for the Brazilian product this year relative to early 2023, Indian volumes in the first two months of 2024 rose to 2,042t from 1,961t in the same period of 2023. Sellers in Brazil believe tighter supply can support firm pricing looking forward, but demand from markets like China and India are largely price driven. By Leonardo Siqueira Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
