Viewpoint: Refined vegoils to feed into 2022 RD supply

Market: Agriculture, Biofuels
30/12/21

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.

By Jamuna Gautam

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News

20/12/24

Viewpoint: EU, UK mandates will drive global SAF demand

London, 20 December (Argus) — Europe will be a primary consumption hub for sustainable aviation fuel (SAF) in 2025, driven by EU and UK mandates that come into effect in January. The mandates could push European SAF demand above 1.5mn t next year, according to Argus Consulting estimates. There should be more than enough global SAF supply to meet mandated demand in Europe in the early stages of obligations. If all announced projects are completed on time, global capacity could surpass 10mn t/yr in 2025, according to Argus Consulting, with hydrotreated esters and fatty acids synthetic paraffinic kerosene (HEFA-SPK) still the dominant SAF production pathway. But several projects have been hit with delays in the past, and some European majors have scaled back or paused their capacity plans. Actual production is likely to be far lower than nameplate capacity, with the International Air Transport Association (Iata) forecasting global output of 2.1mn t next year . European suppliers may also opt to maximise hydrotreated vegetable oil (HVO) production over HEFA-SPK. In most HEFA-SPK plants, the production process relies on first hydrotreating vegetable oils and fats, a process aligned with standard HVO production. Renewable diesel demand should increase with higher mandates for renewables in road transport and changes to German and Dutch carryover rules on renewable fuel tickets next year. At the same time, European HVO imports face barriers. Definitive EU anti-dumping duties (ADDs) on Chinese biodiesel and HVO are expected to be imposed by February . And anti-dumping and anti-subsidy duties are in place on HVO and biodiesel of US and Canadian origin . SAF is excluded from ADDs on Chinese biofuels. SAF supply has grown at a faster pace than demand this year, pushing the northwest European HEFA-SPK premium to jet fuel to record lows . The European benchmark HEFA-SPK fob ARA range assessment averaged around $2,203/t over 1 January-12 December, down from around $3,016/t in the same period last year. Ready, set, mandate Fuel suppliers will need to incorporate a 2pc share of SAF in their annual EU jet fuel deliveries from next year, with the share rising to 70pc by 2050. Synthetic aviation fuels, such as e-kerosine and hydrogen, must reach a total share of 1.2pc from 2030, rising to 35pc in 2050. The UK's mandate also requires aviation fuel suppliers to hit a 2pc SAF share in 2025, increasing linearly to reach 22pc in 2040. A UK obligation for power-to-liquid SAF will be introduced from 2028 at 0.2pc of total jet fuel demand, rising to 3.5pc in 2040. Separately, London's Heathrow airport aims to increase the share of SAF used to 3pc in 2025 as part of an incentive scheme that helps airlines cover extra costs. Beyond Europe Progress to introduce SAF blending obligations or legislate consumption targets is slower outside of Europe. In China, a pilot programme was launched earlier this year to support domestic SAF uptake. A consumption target of 50,000t was set in the country's five-year plan for 2021-25. Other initiatives in the Asia-Pacific region include South Korea's plan to require all international flights departing from its airports to use a mix of 1pc SAF from 2027 and Singapore's 1pc SAF target by 2026 for flights departing the country. Indonesia plans to require 1pc SAF from 2027, while Malaysia and Hong Kong are also expected to set targets. In the US, the level of priority to be given to renewable aviation fuels is less clear following Donald Trump's election victory. Guidance around a new producers' tax credit, set to come into effect next year, is still pending . The growth of the US SAF market has so far been driven mainly by federal and state financial incentives. By Giulia Squadrin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more

News

Trump backs new deal to avoid shutdown: Update

19/12/24

News

19/12/24

Trump backs new deal to avoid shutdown: Update

Adds updates throughout Washington, 19 December (Argus) — US president-elect Donald Trump is offering his support for a rewritten spending bill that would avoid a government shutdown but leave out a provision authorizing year-round 15pc ethanol gasoline (E15) sales. The bill — which Republicans rewrote today after Trump attacked an earlier bipartisan agreement — would avoid a government shutdown starting Saturday, deliver agricultural aid and provide disaster relief. Trump said the bill was a "very good deal" that would also include a two-year suspension of the "very unnecessary" ceiling on federal debt, until 30 January 2027. "All Republicans, and even the Democrats, should do what is best for our Country, and vote 'YES' for this Bill, TONIGHT!" Trump wrote in a social media post. Passing the bill would require support from Democrats, who are still reeling after Trump and his allies — including Tesla chief executive Elon Musk — upended a spending deal they had spent weeks negotiating with US House speaker Mike Johnson (R-Louisiana). Democrats have not yet said if they would vote against the new agreement. "We are prepared to move forward with the bipartisan agreement that we thought was negotiated in good faith with House Republicans," House minority leader Hakeem Jeffries (D-New York) said earlier today. That earlier deal would have kept the government funded through 14 March, in addition to providing a one-year extension to the farm bill, $100bn in disaster relief and $10bn in aid for farmers. The bill would also provide a waiver that would avoid a looming ban on summertime sales of E15 across much of the US. Ethanol industry officials said they would urge lawmakers to vote against any package without the E15 provision. "Pulling E15 out of the bill makes absolutely no sense and is an insult to America's farmers and renewable fuel producers," Renewable Fuels Association chief executive Geoff Cooper said. If no agreement is reached by Friday at 11:59pm ET, federal agencies would have to furlough millions of workers and curtail services, although some agencies are able to continue operations in the event of a short-term funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

US Congress passes waterways bill

19/12/24

News

19/12/24

US Congress passes waterways bill

Houston, 19 December (Argus) — The US Senate has passed a bipartisan waterways infrastructure bill, providing a framework for further investment in the country's waterways system. The waterways bill, also known as the Water Resources and Development Act (WRDA), was approved by the Senate in a 97-1 vote on 18 December after clearing the US House of Representatives on 10 December. The WRDA's next stop is the desk of President Joe Biden, who is expected to sign the bill. The WRDA has been passed every two years, authorizing the US Army Corps of Engineers (Corps) to undertake waterways infrastructure and navigation projects. Funding for individual projects must still be approved by Congress. Several agriculture-based groups voiced their support for the bill, saying it will improve transit for agricultural products on US waterways. The bill also shifts the funding of waterways projects to 75pc from the federal government and 25pc from the Inland Waterways Trust Fund instead of the previous 65-35pc split. "Increasing the general fund portion of the cost-share structure will promote much needed investment for inland navigation projects, as well as provide confidence to the industry that much needed maintenance and modernization of our inland waterway system will happen," Fertilizer Institute president Corey Rosenbusch said. The bill includes a provision to assist with the damaged Wilson Lock along the Tennessee River in Alabama. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

USDA awards more funding to increase fertilizer output

19/12/24

News

19/12/24

USDA awards more funding to increase fertilizer output

Houston, 19 December (Argus) — The US Department of Agriculture (USDA) awarded over $100mn this week across nine states to increase domestic fertilizer production as the effort to make farmer affordability more favorable continues. About $116mn will be invested through the USDA's Fertilizer Production Expansion Program (FPEP) to help eight facilities expand output in California, Colorado, Georgia, Indiana, Iowa, Kansas, Michigan, Oklahoma and Wisconsin. Recipients include the Michigan Potash Company, where the construction of a new facility should yield 400,000 metric tonnes (t) annually of high-grade potash, and Farmers Cooperative Association, where funding will expand its existing dry fertilizer facility with additional storage and processing capacity. "When we invest in domestic supply chains, we drive down input costs and increase options for farmers," USDA secretary Tom Vilsack said. Through the FPEP, the USDA has invested $517mn in 76 fertilizer production facilities across 34 states and Puerto Rico. President Joe Biden's administration committed up to $900mn in the program through the Commodity Credit Corporation, which is expected to support long-term investments by strengthening supply chains. Higher US fertilizer prices throughout this year deterred fall demand as lower crop prices forced farmers to sell more of a crop to afford nutrients. The last USDA FPEP funding announcement was in August , when $35mn was granted to boost seven domestic production projects. By Taylor Zavala Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indonesia’s Pertamina seeks UCO for SAF output

19/12/24

News

19/12/24

Indonesia’s Pertamina seeks UCO for SAF output

Singapore, 19 December (Argus) — Indonesia's state-owned refiner Pertamina is seeking around 500t of used cooking oil (UCO) for trial production of co-processed sustainable aviation fuel (SAF) at its Cilacap refinery in the first quarter of 2025, sources close to the company said. The refiner is seeking UCO with better specifications from domestic Indonesian suppliers, said traders and sellers. The UCO will likely have a maximum of 2pc free fatty acid (FFA) content — compared with Argus -assessed maximum 5pc FFA Indonesian UCO — as well as low metals and chlorides content, said a trader, although this could not be confirmed with Pertamina. Earlier in December, Pertamina's refining and petrochemical subholding company, Kilang Pertamina Internasional (KPI), signed an initial agreement with Indonesian UCO supplier, PT Gapura Mas Lestari. Gapura will be supplying UCO to Pertamina in 2027, sources from both companies said. Indonesia's co-ordinating Ministry for Maritime Affairs and Investment had announced in September that international flights departing the country will be required to use 1pc SAF in their fuel mix in 2027. This will rise to 2.5pc by 2030, 12.5pc by 2040, 30pc by 2050, and 50pc by 2060. Pertamina's "green refinery" at its 348,000 b/d Cilacap plant aims to process 6,000 b/d of UCO to produce hydrotreated vegetable oil (HVO) and SAF, when its second phase comes on line, targeted to be in 2026 . Cilacap is eventually expected to produce around 300,000 kilolitres of HVO and SAF annually. Pertamina said Cilacap's HVO will be used as a blending component in diesel fuel with better quality, compared with traditional fatty acid methyl ester biodiesel. The firm added that its HVO is also designed to meet stringent market standards in countries like those in Europe and North America. Its SAF will meet Indonesia's demand, which is likely to rise after the country released its national roadmap for SAF development in September. Cilacap currently produces HVO, but from refined, bleached and deodorized palm oil, and SAF from refined, bleached and deodorized palm kernel oil, a product of palm kernel oil processing. By Sarah Giam 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