Interest in the California LCFS market remained slow on Tuesday after the market traded last on Friday at $80, with a scarcity of fresh bids and offers shown today. Indicative bids walked back down to $78, while offers indications sat high at $85 for Q1 transfer amid expectations of a price surge in the New Year when tougher CI compliance targets come into force. LCFS participants are meanwhile waiting for fresh cues from the physical fuel supply business to steer direction amid lingering uncertainty over overseas and federal tax policies and their likely effect on import economics into the US.
Midwest corn ethanol was discussed around a 174cents/gal midpoint for delivery to northern California on Tuesday. The biofuel carries a CI value of between 80-85gCO2g/MJ which would generate a credit premium of between 8.5-11cents/gal given LCFS prices at current levels.
The US biodiesel market continues to struggle with a lack of clarity over biodiesel tax credit reinstatement. With domestic biodiesel capacity utilization languishing at around 60% the proposal to shift the credit from blenders to US producers has the full backing of US producers’ association NBB. Advanced biofuels association ABFA however cautions the shift threatens the diversity of fuels available in the US supply chain which could drive up pump prices and by extension wholesale prices.