Viewpoint: Refined vegoils to feed into 2022 RD supply
The feedstock slate for nearly half of total current and announced renewable diesel (RD) plant capacity will require refined vegetable oils through mid-2022 or later, which could push refined/bleached/deodorized (RBD) soybean oil prices to retest recent highs.
Of the total 6.9bn USG/yr (450,100 b/d) of current and announced US renewable diesel capacity, 41pc will lack pretreatment units (PTUs) until mid-2022 or after, creating more demand for refined vegetable oils, of which RBD is the most widely used.
Renewable diesel facilities lacking a PTU are unable to process lower-quality feedstocks like used cooking oil (UCO), distillers corn oil (DCO) and tallows due to higher levels of impurities. So those lacking PTUs have to depend on refined feedstocks like RBD soybean oil and refined canola oil to produce renewable diesel.
At the end of June 2021, competition between the food and fuel sectors pushed spot prices for RBD soybean oil to as high as a premium of 33¢/lb to CBOT soybean oil futures for delivery to the Midwest. Prices have since fallen to around 15.75¢/lb to CBOT soybean oil futures as railroad congestion suppressed demand from biofuel facilities. Slower demand from the food services industry during the holiday season has put additional pressure on prices. But as the congestion dissipates in 2022, and as more renewable diesel plants without PTUs become operational, RBD soybean oil prices could reach the same premiums as in June.
The US currently has 1.55bn USG/yr (101,000 b/d) of capacity across 11 renewable diesel facilities. Another 10 plants are expected to come on line in 2022, adding about 1.64bn USG/yr to US capacity and creating more demand for feedstocks. Another 3.71bn USG/yr of renewable diesel capacity is expected to come on line in 2023-2026.
Soybean oil is currently the most used feedstock for biofuel production, with the latest data from the Energy Information Administration reporting consumption at 756mn lbs in September, followed by yellow grease — which includes used cooking oil (UCO) — at 219mn lbs. But soybean oil could make up a larger portion of biofuel production moving into 2022.
Multiple oil companies with renewable diesel projects have partnered with established agricultural suppliers to secure volumes of soybean oil. Until these feedstocks partnerships become operational, renewable diesel facilities relying on RBD soybean oil will have to compete with the food industry, which usually pays a premium for the feedstock.Marathon Petroleum and multinational foods processor Archer Daniels Midland (ADM) announced joint operation of a soybean crushing and refining facility in Spiritwood, North Dakota.
Oil major Chevron and agricultural commodity firm Bunge locked in a deal to nearly double the capacity of Bunge's soybean crushing facilities in Illinois and Louisiana. Chevron will receive soybean oil produced at the Bunge facilities for renewable diesel production at its California plant. Phillips 66 also signed a supply agreement with an Iowa-based soybean processing plant, while Cargill plans to invest in soybean processing facilities in seven states, with an approximate investment of $475mn.
Demand for less carbon intensive feedstocks like UCO, DCO and tallows is also touted to rise, as biofuel produced from those feedstocks generates more credits under California's Low-Carbon Fuel Standard program.
But limited supply of feedstocks like UCO and other waste fats and oils could pose a challenge to the thriving biofuel industry. Accessing international UCO markets could pave the way for securing feedstock, with companies like Neste leading the way with its acquisition of UCO collector Mahoney Environmental and residue fat and oils trading company Agri Trading in the US.
Some have taken the possible supply crunch to highlight new opportunities for use of feedstocks like catalina, camelina and rye, with companies even exploring wood residues as an alternative.
Although feedstock availability was rarely quoted as an issue by market participants in 2021, prices rose sharply on the back of strong demand, pushing almost all feedstock prices to hit several record highs over the year.
In the first quarter of 2021, Phillips 66 started operations on renewable diesel production from a converted hydrotreater at its Rodeo, California, refinery, while Marathon reached full capacity at its 184mn USG/yr Dickinson renewable diesel facility in North Dakota during the second quarter. A 400mn USG/yr expansion of Diamond Green Diesel's 290mn USG/yr facility in Norco, Louisiana, also came on line in the fourth quarter, establishing itself as the largest feedstocks demand center inside the US.
The rise in demand pushed prices for UCO in the US Gulf coast to an all-time high of 71.5¢/lb on 25 October and DCO prices reached a record 71.5¢/lb on 17 August.
Prices experienced a brief downdraft during September, reflecting the impact of Hurricane Ida that made landfall in Louisiana on 29 August, but prices rose back up to pre-hurricane levels in mid-October.
The holiday season has lowered some feedstocks prices as 2021 ends, but market participants expect trading activity and prices to pick up after the season ends.
Related news posts
Estoques de etanol no Centro-Sul recuam em abril
Estoques de etanol no Centro-Sul recuam em abril
Sao Paulo, 29 April (Argus) — Os estoques de etanol no Centro-Sul caíram 18pc na primeira metade de abril, à medida que as atividades da safra de cana-de-açúcar de 2024-25 começaram. Os estoques do biocombustível na principal região produtora do Brasil recuaram para 2,2 milhões de m³ até o dia 16 de abril, em comparação com 2,7 milhões de m³ registrados na quinzena anterior, segundo dados do Ministério da Agricultura. Na comparação com o mesmo período do ano passado, quando os estoques foram de 1,9 milhão de m³, o avanço foi de 17pc. Os estoques de etanol hidratado representaram 1,3 milhões de m³ do total acumulado no período, baixa de 14pc na quinzena e alta de 12pc na variação anual. Já o etanol anidro totalizou cerca de 875.700m³, queda de 23pc na comparação com a quinzena anterior e crescimento de 25pc no ano. Até 16 de abril, 171 plantas haviam iniciado as operações para a nova temporada, em comparação com 166 unidades no mesmo período do ciclo anterior, de acordo com a União da Indústria de Cana-de-Açúcar e Bioenergia (Unica). O início da safra facilitou o acesso de participantes de mercado aos estoques do biocombustível, ao passo que alguns players reportaram dificuldades em comprar de estoques no fim de março. Por Laura Guedes Produção sucroalcooleira do Centro-Sul 15-Abril ano atrás ± Etanol total m³ 830.437 721.630 15% Cana-de-açúcar '000t 15.847 15.155 5% Açúcar t 675.822 582.476 16% Mapa Envie comentários e solicite mais informações em feedback@argusmedia.com Copyright © 2024. Argus Media group . Todos os direitos reservados.
Norway's marine bio mandate ineffective: Marine market
Norway's marine bio mandate ineffective: Marine market
London, 29 April (Argus) — Norway's 6pc advanced biodiesel mandate for marine, which came into effect in October, has done little to incentivise the uptake of physical marine biodiesel blends at Norwegian ports, market participants told Argus . As of October 2023, bunker fuel suppliers in Norway must ensure that a minimum of 6pc, on a volume per volume basis, of the total amount of liquid fuels sold per year consists of advanced biofuel in the form of fatty acid methyl ester (Fame) or hydrotreated vegetable oil (HVO). The mandate is only applicable to bunker fuels sold in the domestic market, impacting vessels operating between Norwegian ports as well as local tugboats, offshore supply barges, and fishing vessels. Market participants confirmed that the mandate operates on a mass-balance system at the moment, such that the mandate could also be met by supplying the equivalent amount of biofuels into the inland road sector. Consequently, participants said that very few buyers end up purchasing the physical marine biofuel blends, and instead marine fuel suppliers have had to utilise the mass-balance system to meet their mandated targets. This has resulted in a premium added onto conventional bunker fuels in Norwegian ports of about $56-60/t on average. A market participant described the current system as "like a CO2 tax", with most marine fuel buyers paying the premium rather than purchasing a marine biodiesel blend directly. Participants told Argus that HVO is popular and frequently used in road transport because of its superior specifications compared with biodiesel and its generally low freezing point. Norway's HVO imports typically originate from the US — Kpler data shows that about 68.4pc of HVO flows into Norway have originated from there this year. This is mainly because Norway does not apply the same anti-dumping measures as EU nations, which typically put a substantial premium on US-origin biodiesel imports. Norwegian shipowners going internationally are exempt from being liable to the additional premium imposed by the mandate. But participants told Argus that they usually have to pay the premium and then claim it back from the Norwegian Environment Agency (NEA). The system may change very soon. Market participants told Argus that the NEA is considering some changes to the mandate requirement. A gradual move away from the mass balance system is being discussed, in favour of a physical product mandate that would require biofuel blends to be sold to bunker fuel buyers. Further, a switch from an annual reporting system to a monthly one could also be on the cards. NEA is also reportedly looking at mandating the availability of marine biodiesel at all Norwegian ports and biodiesel fuel reconciliation at the tank rather than terminal. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
STB chair Oberman to leave rail agency on 10 May
STB chair Oberman to leave rail agency on 10 May
Washington, 26 April (Argus) — US Surface Transportation Board (STB) chairman Martin Oberman (D) said today that he would retire in two weeks, though a replacement has not been named. Oberman informed President Joe Biden of his decision in a letter earlier today. Oberman said in mid-November 2023 that he would exit the agency in early 2024 . His five-year term expired on 31 December but he continued to serve into his one-year holdover term. No additional details have been announced, but vice chairman Karen Hedlund (D) is expected to lead the rail regulator until a formal appointment has been made. Chairman Oberman's "commitment to exploring all sides of an issue was pivotal in helping to find solutions for stakeholders," the Freight Rail Customer Alliance said. National Grain and Feed Association chief executive Mike Seyfert said pointed to Oberman's actions in working toward significant regulatory milestones for agricultural shippers and railroads. Under Oberman's leadership, STB has moved forward on long-standing proposal to allow reciprocal switching. The switching plan would allow a shipper served by a single railroad to request that its freight be transferred to another major railroad at a designated interchange point. STB is expected to act on reciprocal switching as early as this month, after introducing a plan tied to railroad service performance in September 2023. His term was also highlighted by several major industry events, such as the Covid-19 pandemic, the merger of Canadian Pacific and Kansas City Southern and the 2022 rail service crisis. Oberman was nominated by former US president Donald Trump in July 2018. His appointment was confirmed by the US Senate in January 2019 and he was appointed chairman by President Joe Biden in January 2021. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
High inventories pressure Brazil biodiesel prices
High inventories pressure Brazil biodiesel prices
Sao Paulo, 26 April (Argus) — Logistical differentials for Brazilian biodiesel contracts to supply fuel distributors in May and June fell from March and April values, reflecting higher inventories and a bumper crop of soybeans for crushing, which could increase vegetable oil production. The formula for the logistics differential of plants includes the quote of the soybean oil futures contract in Chicago, its differential for export cargoes in the port of Paranagua and the Brazilian real-US dollar exchange rate. It is the portion in the pricing linked to producers' margin. Negotiations for May and June started with plants seeking higher values to recover part of the losses incurred by unscheduled stops , the result of retailers' delays in collecting biodiesel. But the supply glut has not abated, leading to a drop in prices. With higher inventories in the market, fuel distributors stuck close to acquisition goals established by oil regulator ANP for the May-June period. Sales are expected to gain traction over the next two months, as blended diesel demand traditionally gets a seasonal boost from agricultural-sector consumption linked to grain and sugarcane crops. The distribution sector expects an extension of the current supply-demand imbalance, exacerbated by significant volumes of imported diesel at ports and lower-than-expected demand. The situation has generated concern among many participants, who see this trend as a potential sign of non-compliance with the biodiesel blending mandate. ANP data show that the compliance rate with the Brazilian B14 diesel specification dropped to 83.4pc in April from 95.2pc in March, reaching the lowest level since the 2016 start of monitoring. Non-compliance with the minimum biodiesel content accounted for 67pc of the infractions recorded during the period compared to a historical average rate of 47pc. The recent end to a special tax regime for fuel importing companies offered by northern Amapa state's secretary of finance should end a significant source of diesel price distortions and help rebalance supply in the country. Variations The steepest decline in differentials took place in northeastern Bahia state, where premiums for the period ranged from R600-830/m³ (44.35-61.35¢/USG), down from R730-1,020/m³ in the March-April period, according to a recent Argus survey. In the northern microregion of Goias-Tocantins states, the premium range also dropped by around R142/m³ to R300-535/m³ from R440-680/m³. By Alexandre Melo Brazil biodiesel plant differentials R/m³ May/June March/April ± Low High Low High Rio Grande do Sul 110 380 280 450 -120 Sorriso-Nova Mutum 50 340 220 350 -90 Cuiaba-Rondonopolis 80 405 280 450 -123 Northern of Goiás-Tocantins 300 535 440 680 -142 Southern of Goias 350 500 450 650 -125 Parana-Santa Catarina 150 450 400 480 -140 Bahia 600 830 730 1,120 -210 Source: Argus survey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more