Chevron-REG closing 2 biodiesel plants: Update:

Spanish Market: Biofuels
01/03/24

Adds information on Iowa Chevron-REG plant closure

Chevron's renewable fuels business unit is closing indefinitely two biodiesel plants in Wisconsin and Iowa "due to market conditions," according to the company.

The closures of Chevron-REG's 2,000 b/d Madison, Wisconsin, and 3,000 b/d Ralston, Iowa, plants come on the heels of deteriorating production economics for biodiesel, with a low Renewable Volume Obligation (RVO) for producers and extensive renewable diesel (RD) capacity coming online this year.

The Argus RVO has hovered at four year lows amid a tidal wave of D4 renewable information number (RIN) credit generation brought about by rising levels of RD production. In 2023, 7.96bn D4 RINs were generated — a 38pc increase compared with 2022 generation figures.

US annualized RD capacity in 2023 was 3.4bn USG and could grow to 4.9bn by 2025.

RD can be used as a drop-in fuel in place of petroleum diesel. Producers of RD receive more RIN credits than producers of biodiesel, leaving those plants less competitive, according to participants.

Chevron-REG has seven biodiesel plants in the midcontinent, totaling 21,000 b/d of output, including its DeForest plant, according to the Energy Information Administration (EIA).

By Payne Williams

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27/12/24

Viewpoint: Policy doubts hit Australia's biofuel sector

Sydney, 27 December (Argus) — Australia's biofuels sector has garnered significant interest during the first 2½ years of the current federal Labor government, but uncertainty over key policy support measures has stymied investment and led developers to question whether 2025 will be a year of reform. Labor secured its first majority government since 2007 in the mid-2022 election and subsequently pledged to cut Australia's greenhouse gas emissions by 43pc on 2005 levels by 2030. But the country is not on track to meet this ambitious target because of slow progress decarbonising its electricity and transport sectors. Biofuels have become increasingly popular, given decarbonising hard-to-abate transport industries is seen as key to reaching the 2030 goal. Canberra has committed to a low carbon liquid fuels (LCLF) standard, which the industry views as crucial to enabling investment in processing, refineries and new feedstock crops. In its May 2024 budget, the federal government expressed a desire to develop sustainable aviation fuel (SAF) and renewable diesel (HVO) industries. The outcomes of consultations are expected to be released imminently. On the demand side, a regulatory impact analysis of the costs and benefits associated with mandates for LCLF has been promised, but no timeframe has been released. Domestic refiners Ampol and Viva, as well as BP at its former Kwinana refinery, have expressed interest in biofuel production but all require certainty on demand and supply-side support mechanisms. Australian bioenergy developer Jet Zero and a consortium including major airlines aim to build a 113mn litres/yr plant in the northern part of Queensland state, but initial engineering for the concept has not yet been completed. The consortium plans to convert bioethanol from domestic agricultural byproducts like sugarcane molasses into SAF and HVO through the alcohol-to-jet pathway, with production expected to start in 2027. Jet Zero is also planning to produce SAF through the Hydrotreated Esters and Fatty Acids (HEFA) production pathway in a 50:50 joint venture with Aperion Bioenergy. But the project, which is still in its feasibility stage, is facing hurdles in pricing the feedstock offtake agreements or term contracts. Complicating the picture, heavy transport is now showing greater signs of electrification, as demonstrated by iron ore producer Fortescue's major order for new electric haul trucks. Regardless, the introduction of new safeguard mechanism laws requiring large emitters to reduce pollution has led Australia's fuel companies to increase HVO sales, with 500,000l contracts now signed on a regular basis despite the higher costs. Australian coal mining firm Stanmore has tested a 20pc HVO blend at its Bowen basin Poitrel mine, demonstrating an increasing acceptance of biofuels by customers. Ampol and Viva both sell fatty acid methyl esters (Fame) based biofuel blends at 5pc, 10pc and 20pc. Ampol has two projects in the pipeline: a co-processing facility that would supply up to 60mn l/yr by 2026 and the Brisbane renewable fuels joint venture, which would be a larger project of 0.5bn-1bn l/yr and is due for a final investment decision by late 2025. Viva has been less forthcoming about its plans for biofuel production since it announced a new biofuel blending venture at its 120,000 b/d Geelong refinery in 2023. There will be a federal election no later than mid-May 2025 and both major parties are keen to enhance their green image while supporting regional communities and manufacturing jobs. New regulatory support is crucial if Australia is to transition from supplying significant quantities of feedstock for biofuels to other countries, particularly tallow and canola seed, to producing its own renewable fuels. Australia's increasing reliance on imported oil products and foreign crude, along with a worsening geopolitical backdrop, has started to raise concerns in Canberra. This could be the deciding factor in whether the government will create the required regulatory environment for a local biofuels industry to thrive. By Tom Major and Tom Woodlock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Ethanol producers face higher costs in 2025

24/12/24

Viewpoint: Ethanol producers face higher costs in 2025

London, 24 December (Argus) — European ethanol producers may face rising output costs in 2025 as a poorer harvest season will push feedstock prices up, while other factors such as greenhouse gas (GHG) emission values could affect the price of finished products. Unfavourable weather conditions have led to a poor 2024-25 harvest, particularly for wheat. In Ukraine, Europe's largest wheat exporter excluding Russia, Argus forecasts wheat production will drop to 22.3mn t during 2024-25 , down from a five-year average of 24.7mn t. Corn supply from the country for 2024-25 is projected to fall to 22.9mn t, down from 31.5mn t in the previous season, according to Argus data. France — Europe's largest producer of ethanol — has cut its wheat production outlook for 2024-25 because of wet weather. And rainfall in other parts of Europe has affected corn toxin levels, potentially leading to poorer quality ethanol. This will likely weigh on ethanol output in 2025 as it will strain feedstock supplies, push production costs up and squeeze margins for producers. Nuts 2 It comes as markets are still waiting for an update on level 2 in the nomenclature of territorial units for statistics greenhouse gas (GHG) emission values — the so called Nuts 2 values. To determine the GHG emissions from growing crops in the EU, the bloc's Renewable Energy Directive (RED) allows the use of typical units that represent the average GHG value in a specific area. On the back of the implementation of the recast of RED (RED II), the European Commission requested an update of the Nuts 2 GHG values. Member states have to prepare new crop reports to be assessed by the commission. But reports have been slow to emerge, while those that have been submitted face a lengthy review. Producers rely on GHG values to calculate the GHG savings of end-products, but default RED values currently in place are significantly lower than the typical GHG values from Nuts 2. While this is unlikely to have long-term effects beyond 2025, in the current context finding values that meet market participants' criteria has been difficult for some, which may support prices. Rising demand Demand for waste-based and ethanol with higher GHG savings should increase in 2025 as a result of policy changes, after lower renewable fuel ticket prices in key European markets kept buying interest in check in 2024. Tickets are generated by companies supplying biofuels for transport. They are tradeable and can help obligated parties meet renewables mandates. The decline in prices for GHG tickets in Germany — the main demand centre for minimum 90pc GHG savings ethanol — weighed on ethanol consumption in 2024, squeezing the differential to product with lower GHG savings. The premium averaged around €17/m³ ($17.7/m³) from 1 January-1 December 2024, down from around €43/m³ during the same period in 2023. But an increase in Germany's GHG quota in 2025, coupled with Germany's decision to pause the use of GHG certificates carried forward from previous compliance years towards the 2025 and 2026 blending mandate, should increase physical blending and lift premiums for ethanol with high GHG savings, according to market participants. Meanwhile, the Netherlands' ministry of infrastructure and water management's plan to reduce the amount of Dutch tickets that obligated companies will be able to carry forward to 2025 to 10pc from 25pc may have little effect on Dutch double-counting ethanol premiums in 2025. Participants expect steady premiums, despite slightly higher overall blending targets. The Argus double-counting ethanol fob ARA premium to crop-based ethanol fob ARA averaged €193/m³ from 1 February-1 December 2024. Biomethanol slows Lower ticket prices in the UK have kept a lid on demand for alternative waste-based gasoline blendstock biomethanol. The Argus cif UK biomethanol price averaged $1,089/t from 1 Jauary-1 December, compared with $1,229/t during the same period of 2023. The European Commission's proposal to exclude automatic certification of biomethane and biomethane-based fuels, if relying on gas that has been transported through grids outside the EU, continues to slow negotiations for 2025 imports of biomethanol of US origin into the EU. But demand for biomethanol and e-methanol could be supported by growing interest from the maritime sector as shipowners seek to reduce emissions after the EU's FuelEU maritime regulation comes into effect. Shipping giant Maersk has signed several letters of intent for the procurement of biomethanol and e-methanol from producers such as Equinor , Proman and OCI Global . By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump-Panama tiff highlights rising transit cost

24/12/24

Trump-Panama tiff highlights rising transit cost

New York, 23 December (Argus) — US president-elect Donald Trump's threat on Saturday to reclaim the Panama Canal for the US put a spotlight on rising costs this year and additional fees planned by the Panama Canal Authority (ACP) for 2025 in the ongoing fallout of a 2023 drought in Central America. Trump claimed that the US is the "number one user" of the Panama Canal, with "over 70pc of all transits heading to, or from, US ports" on 21 December. ACP data for ships destined for or departing from the US puts this percentage at 73pc in 2023 and 75.5pc in 2024 based on total tonnage of commodities moved through the canal. "This complete ‘rip-off' of our Country will immediately stop…" Trump said. The base transit tolls at the Panama Canal have been on the rise and are largely in line with those at the Suez Canal, but Panama Canal costs can be much higher for vessel operators that compete in auctions to enter the Central American passageway. The operator of a medium range (MR) tanker traveling laden through the Panama Canal would pay $279,564.87 in transit fees, while the operator of a laden very large gas carrier (VLGC) would pay $505,268.24 without accounting for reservation costs, ACP estimates. Suez Canal fees have also been on the rise , with MR tanker at $274,001 throughout 2024, while a VLGC operator would pay $487,562. But after last year's drought caused the ACP to temporarily limit transits, ACP required shippers to book transit reservations. Shippers unable to secure reservations via pre-booking often resort to the transit slot auction, where winning bids vary wildly. Pre-booked transit slots often quickly sell out to the containership and LPG vessel owners that dominate the top spots on the ACP's client list. Auction prices for the Neopanamax locks, which have a starting bid of $100,000 and handle large vessels like VLGCs, are at about $220,000, per Argus assessments. Auction prices for the Panamax locks, which have a starting bid of $55,000 and handle vessels like MR tankers, are around $75,000. The highest Neopanamax auction price was nearly $4mn, with the highest Panamax auction price at about half that level. In December 2023, 30pc of Panamax lock tanker transits were reserved via the auction system , according to ACP. The president-elect's criticism of the ACP's handling of Panama Canal fees comes as the administrators of the waterway bounce back from a severe drought throughout 2023. Freshwater levels in the manmade Gatun Lake that helps to feed the canal have recovered because of the return of the rainy season this year, but ACP has maintained its requirement that shippers wishing to transit have reserved transit slots. Prior to the drought, ACP maintained a first-come, first-serve basis for vessels without reservations. ACP ups reservation costs, adds fees for 2025 Starting in 2025, ACP is maintaining the auction system while also increasing pre-booking costs and adding other fees. ACP will raise transit reservation fees from $41,000 to $50,000 for Panamax lock transits for "Super" category vessels, including MR tankers. Neopanamax lock transit reservation fees will climb from $80,000 to $100,000 on 1 January. ACP announced a third transit option in late 2024 for vessel operators in the form of the "Last Minute Transit Reservation" (LMTR) fee to start 1 January 2025 alongside other new fees and higher existing reservation fees. ACP set the cost of the LMTR fee at about twice the starting bid of an auction , or $100,000 for Supers and $200,000 for Neopanamax, and will likely offer the LMTR fee to vessels that fail to secure a transit slot at auction. Furthermore, vessel operators that cancel within two days of their transit will be charged a fee at 2.5 times the transit reservation fee, described by the ACP as a surcharge to the existing cancellation fee, which ranges up to 100pc of the transit reservation fee depending on how close to the transit date that an operator cancels. This means that a Super vessel that cancels within two days of its transit date will receive the 2.5 times surcharge on top of the 100pc transit reservation cancellation fee and pay a total of $175,000. A Neopanamax vessel will pay a total of $350,000. "Vessels of war" should also vie for slots: ACP Trump also suggested that the ACP was charging the US Navy, alongside US corporations, "exorbitant prices and rates of passage" and that these fees were "unfair and injudicious". In March 2024, the ACP published an update on transit slot assignments for vessels of war, auxiliary vessels and other "government-owned" vessels encouraging their operators to participate in the transit system rather than waiting for the ACP to assign them a slot. "Vessels of war, auxiliary vessels, and other government-owned vessels are encouraged to obtain a booking slot through the available booking mechanisms in order to have their transit date guaranteed and minimize the possibility of delays," the ACP said. The ACP points out that these vessels of war are entitled to "expeditious transits" based on the Treaty Concerning Permanent Neutrality and Operation of the Canal and are technically not required to obtain a reservation to be considered for transit. Panama president Jose Raul Mulino on Sunday rejected Trump's threat to retake the canal , which has been under full control of the Central American country since 1999. The canal's rates are established in a public and transparent manner, taking into account market conditions, Mulino said. "Every square meter of the Panama Canal and its adjacent area is Panama's and will continue to be," Mulino said. "The sovereignty and independence of our country are non-negotiable." By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Brazil ethanol demand to remain strong

23/12/24

Viewpoint: Brazil ethanol demand to remain strong

Sao Paulo, 23 December (Argus) — Demand for ethanol in Brazil is expected to remain strong in 2025, as increasing corn ethanol output and less-than-expected crop damage from fires in 2024 should allow retail prices for the biofuel to remain competitive with gasoline. Production of corn-based ethanol in Brazil's center-south rose to 5.25bn l (100,200 b/d) in January-November, a 30pc increase from the same period in 2023, according to regional industry association Unica. The volume accounts for 17pc of the 31.17bn l of ethanol produced in the region during the period. Greater supply of corn-based ethanol should add downward pressure to prices, making ethanol more attractive at retail pumps. The country has 41 corn ethanol plants in operation, according to a survey by agronomist and researcher Rafael Vieira, with more under construction. Dryer weather and wildfires that hit sugarcane fields in 2024 do not appear to be as devastating as initially expected, so biofuel production from sugarcane could be higher than initially expected. Recent data support this outlook. Sugarcane crushing in the center-south surpassed 600mn metric tonnes (t) in April-November, on the high end of the 585mn-605mm t analysts estimated for the full 2023-24 cycle because of the fires and drought. Crushed volumes in the next harvest will depend heavily on the weather in December-January. Rains in this period are crucial for the development of sugarcane plants, as they are in their early growing stages. The more it rains in these two months, the higher the volume processed in 2025-26 should be. Sugar production Rains should also influence sugarcane quality, which affects the production mix, one of the vectors that can sway ethanol prices. The drought made sugarcane less fit for sugar production in 2024. But if the next two months are more humid, producers will be able to achieve a more sugary mix as desired, which tends to boost biofuel prices. Investments in crystallization capacity in recent years are expected to finally translate into greater sugar production in 2025. This is what producers want, as the sweetener currently trades at a premium to ethanol. This trend is supported by India's growing appetite for Brazilian sugar. The Asian country will increase its ethanol blending mandate in 2025, a change that will shift the sugarcane processing profile of the country and create room for Brazilian sugar to fill the resulting supply gap . Hedgepoint Global Markets analyst Livea Coda expects the sugar mix at 51.9c in 2025-26, with room for a revision if summer rains are confirmed. Hedgepoint projects sugarcane crushing at 600mn t in the next harvest, with the possibility of reaching 620mn t if rains "excel". Based on weather forecasts, she expects sugarcane quality to improve. Coda considers it unlikely that ethanol production will pay more than sugar in Brazil, considering that slower growth in the Brazilian economy next year should keep motor fuel demand below 2024 volumes. Analyst Arnaldo Correa, founder of Archer Consulting, predicts the sugar mix at 51.5pc in the next cycle. He expects strong crushing after an increase in sugarcane cultivation area this year, but Correa is not yet ready to make a volume prediction. In his analysis, US president-elect Donald Trump's protectionist policies are also a point of concern for 2025, Correa said. At the start of Trump's second four-year term, the US is expected to impose higher tariffs on products from China , a move that could lead the Asian giant to replace US grains with Brazilian grains. That could lead to higher corn ethanol prices in Brazil, Correa said. By Maria Ligia Barros Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: European HVO demand to rise in 2025

23/12/24

Viewpoint: European HVO demand to rise in 2025

London, 23 December (Argus) — European demand for hydrotreated vegetable oil (HVO), or renewable diesel, will be supported in 2025 by a combination of higher mandates for the use of renewables in transport, and by changes to EU member state regulations on the carryover of renewable fuels tickets, like in Germany and the Netherlands . European HVO production could grow by more than 400,000t in 2025, if announced projects are completed in time. Most new plants have the flexibility to switch to sustainable aviation fuel (SAF) production, in the form of hydrotreated esters and fatty acids synthesised paraffinic kerosene (HEFA-SPK). But those seeking to import HVO into the EU will face barriers. Definitive EU anti-dumping duties (ADDs) on Chinese biodiesel and HVO will be imposed by mid-February , and anti-dumping and anti-subsidy duties are already in place for HVO and biodiesel of US and Canadian origin . Flows of US-origin HVO to the UK are unimpeded as transposed EU duties were removed in 2022 . A clean slate... Against a headwind of gradually shrinking diesel demand, national transport renewables mandates are increasing. These ambitions rise again under the next iteration of the EU's Renewable Energy Directive (RED III), for which member states face a May 2025 transposition deadline. Optimism in the biofuels markets will be tempered by experiences in 2024. The low value of renewable fuel tickets — tradeable credits generated primarily by the sale of biofuel-blended fuels — in major European demand centres has weighed on supplier appetite for physical biofuels. This includes the relatively expensive HVO that can be blended in much greater volumes than cheaper fatty acid methyl esters (Fame). A portion of these tradeable tickets can usually be carried over from one obligation year to the next — as was done from 2023-24 — extending pressure on physical biofuel demand. But Germany has approved a law removing the option for companies to carry over excess 2024 greenhouse gas (GHG) certificates through both 2025 and 2026, aimed at resetting the outlook for physical renewables demand. Obligated parties will need start from scratch to meet their annual GHG savings targets — at 10.6pc for 2025 and 12.1pc for 2026 — resulting in greater demand for physical biofuels including HVO. In the Netherlands, the tickets carryover will be reduced from 25pc to 10pc for companies with an annual blending obligation. ...follows volatility Prompt HVO assessments firmed significantly late in 2024 — albeit from long-term lows — driven by short-term demand in the Netherlands at a time of tight regional supply. HVO (Class II) fob ARA range, a European benchmark based on HVO produced from used cooking oil (UCO), peaked at $1,500/m³ as a premium to escalated gasoil by 14 November — or a 122pc increase from the start of October — equating to $2,652.91/t on an outright basis. Assessments then fell back to a $860/m³ premium a week later, when the market rebalanced as suppliers looked to reroute prompt volumes. Before the rise, prices had hovered around historically soft levels for a sustained period. Sweden's decision to slash its GHG emissions mandate for the 2024-26 period due to fuel price concerns, and the low ticket prices have kept a lid on values. The HVO (Class II) outright price averaged around $1,625/t over 1 January-31 October 2024, down by around $580/t compared with the same period of 2023. While fundamentals now point to growth in European HVO use, the futures curve is backwardated. Those in the market may yet take a position that aligns with this viewpoint, but recent volatility has stunted forward trade. By Toby Shay Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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