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October D4 RIN output maintains its YoY growth

While output of both D4 and D6s has kept on track to meet yearly compliance goals, the RINs market still reacted bullishly Thursday, with D4 RINs edging up to $1/RIN and D6 RINs trading between 81-83 cents/RIN after the release of the EMTS numbers. Uncertainty over next year’s biodiesel tax scenario remains a concern, with D6s leading the way higher for D4s. The market fluctuations if anything reflect a strong expectation for the eventual RVO rule.

D4 biomass-based diesel RIN generation continued its fast pace of generation in October, with a total of 343mn D4 RINs generated, down around 13% MoM but still 30% above the volume generated in the same period last year. D4 October generation landed at the lower end of PRIMA’s most recent estimate of Q4 monthly average generation, as published in November’s PRIMA Monthly RIN Count Report.

The D4 RINs generated in the first ten months of this year now account for over 86% of targeted full year consumption. This is still well above the rate seen at the same time last year. The D4 generation progress calculation includes banked RINs carried over from 2015 into 2016, and also assumes the market will plan to carry 20% of the statuary mandate into 2017. It also assumes a 40% annual decline in D5 generation against the D5 shortfall that D4s will otherwise need to plug.

October D4 RINs generated by importers and foreign producers hit 95mn RINs, accounting for 27.5% of total RIN generation in October. Although the volume is down from importers’ 36% share in September, it is still 22mn gal higher than their contribution last October, reflecting robust imports from Argentina. In total, over 209mn gal of biodiesel was used to generate RINs, of which 92% contributed to D4 generation, with the rest of the volume consumed in D6 output. 49mn gal of renewable diesel was consumed in RIN generation, remaining in line with September.

D5 RIN generation meanwhile edged up slightly to 5.7mn RINs in October, still at the low end of PRIMA’s estimate, reflecting the expectation that import volumes added nothing to October’s output. Total YtD generation through October has contributed just 15.9% of the D5 mandate set out in the RVO, keeping generation progress well below the level seen at the same time last year.

D6 RIN generation edged up by 2.93% MoM to 1.29bn RINs in October, representing growth of just 2% YoY. D6 RIN output reported so far this year has breached just 83% of total annual mandated demand, less than the 87% seen at the same time last year but still on track with the full year compliance schedule, assuming a rational 10% RIN carryover from 2016 into 2017.

D3 RINs reached only between 60%-74% of targeted annual generation through October, well below last year’s pace. MoM growth was at 1.8% to lift output to 17.55mn gal.
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