Market Update: The market continues to increase monthly biomass-based diesel production as the year progresses, which has been typical the past two years. One reason for this is the Blender's Tax Credit (BTC) has expired at the end of each year and it appears as if the industry believes Congress will passes the tax extenders package that includes the BTC for 2015, with a change to a producer's tax credit in 2016. The Senate Finance Committee passed this package in July and the House Ways and Means Committee is voting on pieces of this package separately, but hasn't gotten to any energy incentives yet. Another factor is EPA increasing the D4 RVOs for 2014-2017 in their proposed rule, which will likely be finalized for 2014 & 2015 by Nov. 30th (required by a court order) and hopefully include the 2016 & 2017 RVOs as well.
This increasing production, more talk of a 2015 BTC, and falling soybean oil & biodiesel prices are likely all contributing to the falling 2015 D4 RIN prices. Over a period of a month, 2015 D4 RIN prices have fallen nearly 25 cents to 42 cents and were once over 90 cents at the end of May after the proposed rule was released.
The European Commission just extended their biodiesel anti-dumping duties for another five years on U.S. imports. These duties vary for some producers and include most Canadian producers as well. The National Biodiesel Board attempted to convince the Commission to let these duties expire, but the Commission is focused on protecting EU biodiesel producers and currently has anti-dumping duties also in place on Argentinian and Indonesian imports. According to the Commission, EU producers have increased their market share domestically from 76.3% in 2011 to 89% in 2014. The EU has typically had lower priced biodiesel than the US and most of EU biodiesel is made from rapeseed oil, whereas the majority of U.S. biodiesel is from soybean oil.
Analysis: 2.3 billion pounds of soybean oil was used to produce biodiesel in the first half of 2015, with 474 mil lbs used in June. Soybean oil's share of inputs to biodiesel production is up just slightly for 2015 YTD at 45.56%. Animal fats, which includes poultry, tallow, white grease, and a few other types, have increased their share of inputs into biodiesel by over 3% to 14.02% in the first half of 2015.
PRX estimates US biomass-based diesel (biodiesel & renewable diesel) production for 2015 at 1.429 billion gallons, with production falling just slightly in June to 134 MMgal. The EIA's Sept-STEO (solely biodiesel) has 2015 production estimated up at 1.411 billion gallons with actual monthly data continuing to increase and for Aug it's 138 MMgal, while still forecasting 2016 production at 1.504 billion gallons. EPA D4 Domestic RIN generation volume data for first seven months of 2015 is at 798 MMgal (EPA D4 data understates total domestic biodiesel and renewable diesel production because some is generated as D5 and D6 RINs). PRX estimates 2015 YTD US renewable diesel production at 108 MMgal and is continuing to be lower than expected because REG's Geismar facility, which was likely to come back online soon, just had a second fire on the 4th .
PRX estimates US biomass-based diesel consumption for 2015 at 1.715 billion gallons, with data for June at 166 MMgal. The EIA's Sept-STEO has 2015 biodiesel and imported renewable diesel consumption forecasted at 1.779 billion gallons for 2015, without including PRX's estimated 186 MMgal of domestically produced renewable diesel that is likely to be consumed. Also, the Sept-STEO still has 2016 consumption forecasted at 2.043 billion gallons (not counting US renewable diesel consumed), which is above PRX's forecast of 1.93 billion gallons of biomass-based diesel.
PRX estimates biomass-based diesel imports of 322 MMgal for 2015, with actual data at 178.962 MMgal for the first half of 2015: Neste Oil's plant in Singapore has sent 79.296 MMgal, Argentina 34.02 MMgal, Indonesia 33.81 MMgal, and Canada 24.36. PRX estimates US biodiesel exports in 2015 at 83 MMgal, with actual EIA's PSM data showing 41.706 MMgal of biodiesel exported in the first half of 2015.
