HOUSTON --The nascent market in US biofuels credits is taking baby steps
towards transparency and stability, with a new online trading site poised to report its third transaction later on Wednesday.
"Price discovery is a challenge," said Doug Cummins, of New York-based
brokerage I. A. Englander, a partner in the RINMARK trading site. "Most people are just trying to muddle through."
RINMARK posts bids and offers for Renewables Identification Number (RIN
credits, which are issued by the Environmental Protection Agency (EPA) under a system that came into effect on 1 September.
Englander's partners in RINMARK include fellow brokerage Belzberg Technologies and biodiesel services company Agrifuels.
The website went live on 30 January. The first transaction was on 7 February, at a price equivalent 3 cents/gal (Euro 0.02/gal or Euro 0.08/litre), and the second on 13 February was at 2.5 cents/gal.
Both of those deals represented 5 contracts of 1,000 gal each of 2007 vintage RINs, which refiners and marketers of regular fuels can use until 2009 to offset their obligations under the laws supporting US renewable fuels.
Englander will report another transaction today representing 45,000 gal of 2007 RINs, also at 2.5 cents/gal.
Earlier this month, an EPA official said RINs had been changing hands in the informal market at around 0.25 cent through November, then suddenly soared to 5 cents in December.
While the online volumes and values so far have been small, the RINMARK consortium expects both volumes and values to surge as awareness of the market grows.
More than 25 participants have registered to trade through RINMARK already, while around 2,000 visitors to the website have looked at its registration procedures.
Producers earn RINs through ethanol and biodiesel production, and can then sell them to so-called obligated parties - principally the refiners and marketers of petroleum gasoline and diesel.
But gasoline refiners - who will ultimately each require tens of millions of RINs, from the 9bn of the credits expected to be issued in 2008 - have been reluctant to participate in the RIN market, at least openly.
"At this point, the refiners are just trying to get (biofuel producers) to give them the RINs," said Cummins.
Producers have been inclined to go along with the request because selling the credits was viewed as a paperwork hassle, but attitudes are changing along with the realisation that the RINs could add to the bottom line in a tough business climate.
"If you are a biodiesel producer, you can use the incremental pennies," said Cummins.
The US biodiesel industry has struggled with shrinking margins as the price of soy oil, its main feedstock, has skyrocketed along with other agricultural products.
Market participants estimate US biodiesel plants are running at around 25% of their combined 2.24bn gal (8.5bn litre)/year capacity.
towards transparency and stability, with a new online trading site poised to report its third transaction later on Wednesday.
"Price discovery is a challenge," said Doug Cummins, of New York-based
brokerage I. A. Englander, a partner in the RINMARK trading site. "Most people are just trying to muddle through."
RINMARK posts bids and offers for Renewables Identification Number (RIN
credits, which are issued by the Environmental Protection Agency (EPA) under a system that came into effect on 1 September.
Englander's partners in RINMARK include fellow brokerage Belzberg Technologies and biodiesel services company Agrifuels.
The website went live on 30 January. The first transaction was on 7 February, at a price equivalent 3 cents/gal (Euro 0.02/gal or Euro 0.08/litre), and the second on 13 February was at 2.5 cents/gal.
Both of those deals represented 5 contracts of 1,000 gal each of 2007 vintage RINs, which refiners and marketers of regular fuels can use until 2009 to offset their obligations under the laws supporting US renewable fuels.
Englander will report another transaction today representing 45,000 gal of 2007 RINs, also at 2.5 cents/gal.
Earlier this month, an EPA official said RINs had been changing hands in the informal market at around 0.25 cent through November, then suddenly soared to 5 cents in December.
While the online volumes and values so far have been small, the RINMARK consortium expects both volumes and values to surge as awareness of the market grows.
More than 25 participants have registered to trade through RINMARK already, while around 2,000 visitors to the website have looked at its registration procedures.
Producers earn RINs through ethanol and biodiesel production, and can then sell them to so-called obligated parties - principally the refiners and marketers of petroleum gasoline and diesel.
But gasoline refiners - who will ultimately each require tens of millions of RINs, from the 9bn of the credits expected to be issued in 2008 - have been reluctant to participate in the RIN market, at least openly.
"At this point, the refiners are just trying to get (biofuel producers) to give them the RINs," said Cummins.
Producers have been inclined to go along with the request because selling the credits was viewed as a paperwork hassle, but attitudes are changing along with the realisation that the RINs could add to the bottom line in a tough business climate.
"If you are a biodiesel producer, you can use the incremental pennies," said Cummins.
The US biodiesel industry has struggled with shrinking margins as the price of soy oil, its main feedstock, has skyrocketed along with other agricultural products.
Market participants estimate US biodiesel plants are running at around 25% of their combined 2.24bn gal (8.5bn litre)/year capacity.
