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Renewable fuel companies are crowding out some processors

August 19/2021

MOSCOW (MRC) -- Both renewable fuel processors and oil refiners are trying to profit off the growing market for sustainable fuel and renewable diesel, but high prices for feedstocks like soybean oil has been more of a hazard for refiners, as their most recent earnings showed, said Hydrocarbonprocessing.

These renewable fuel products are a fraction of overall sales of gasoline, diesel and other products, but it is growing. However, demand has helped cause the prices of the ingredients needed - like soybean oil and animal tallow - to rise sharply. Refiners were forced to put off plans for expansion into renewable fuel production, but competitors who specialize in such fuels were able to shift to processing lower-cost feedstocks.

"We are making sure we are not dependent on one or the other feedstock," said Peter Vanacker, Neste's chief executive, in an interview with Reuters. "In the future it's going to be more and more about margin management." Companies such as Renewable Energy Group Inc, Darling Ingredients Inc and Neste all beat estimates for second-quarter earnings even as refiners crowd into the market.

The companies have more flexibility to switch between feedstocks such as used cooking oil and animal fat to make in-demand renewable diesel, said Dhruv Kharbanda, an associate at investment bank Tudor, Pickering, Holt & Co.

"Darling, Neste and Renewable Energy Group benefitted from feedstock flexibility during the quarter, whereas (CVR Energy) and Marathon highlighted the weak economics of running soybean oil," the bank said in a research note.

Marathon Petroleum, which operates America's second-largest renewable diesel facility in North Dakota that primarily runs soybean oil, called the feedstock's economics "challenged" because the heightened prices coupled with the relatively higher carbon intensity of the oil limits the refiners' ability to profit on production.

Renewable Energy Group's gross profit, meanwhile, rose by more than 400% from a year earlier by processing a higher percentage of lower carbon-intensive materials, said the company's chief executive Cynthia Warner.

As MRC informed earlier, in May, 2021, US refiner Marathon Petroleum Corp said its board had approved the conversion of the Martinez refinery in California to a renewable diesel plant. Besides, the company made a final investment decision regarding this project. Martinez, once complete, will be one of the largest renewables facilities in the country.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,176,860 tonnes in the first half of 2021, up by 5% year on year. Shipments of exclusively low density polyethylene (LDPE) decreased. At the same time, PP shipments to the Russian market were 727,160 tonnes in the first six months of 2021, up by 31% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased. Supply of statistical copolymers of propylene (PP random copolymers) subsided.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, biodizel, neftegaz, petrochemistry, Marathon, sustainable development.
Category:General News
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