EMTS data confirms dire situation of Biodiesel/RD in US

Bio/RD took the biggest hit from the fall in generated credits under RFS/EMTS. I am surprised it isn't worse but I think industry was more hopeful in February. This corresponds to a production drop of 300KT in a month's time, which is a pace of 3.6 Mil MT annually, reflecting the concern. This is anecdotally affecting mostly independent biodiesel plants, which at the current biodiesel screen crush margin of even today of negative 28 cents/gallon simply cannot survive very long. As stated before, the market curve is in a carry and not favorable as biodiesel screen crush moves to 36 c/gallon negative by July. D4 RINs moved a bit higher today to 81c/gal but still far from necessary to do the work as BOHO is $1/gallon.

Meanwhile, POGO dropped today by almost 3%, but unfortunately, it was not because of palm oil prices but mostly on account of a rally in gasoil. The Apr/Jul backwardation in gasoil/diesel moved higher by 5% today to +$14.25, mostly on account of increased geopolitical concerns. News of tariffs and counter-tariffs is confusing the trade, but protectionism has been going on for a while, and none better than palm oil imports into EU. The drop in Palm oil imports because of policy into EU, not even tariffs, is a good reflection of this resulting in a significant reduction of 34% in 3 years.

Meanwhile, in the ARAG spot, the biodiesel market was strong with RME values reaching $1,334, while FAME 0 reached $1,302/mt, keeping RME/F0 narrow at $32/mt. Soft oils were generally unchanged after the recent rally, and May BOGO came down further to +$277/MT, widening the spread with UCOME premiums of +842.5/mt over ICE Gasoil, which is fp $1,509. A $564/mt differential over BOGO for 89% GHG savings for UCOME seems expensive when you consider that F0 is +635 and that differentials between 68-89% GHG savings are $100/mt. Since HVO cl2 is +1,000 over ICE Gasoil, it seems like F0 is either too cheap or waste-based bio/RD is simply too expensive. SAF retains its small premium to HVO cl2, but surely any countervailing duties against the US will make this production much more expensive soon. The likelihood of CVD by the UK on US-produced HVO is probably >75%.

Fasten your seat belts, its not over yet!