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Pressure on UK renewable transport fuel certificate (RTFC) prices has triggered a spate of trades throughout the week, sparking one of the most active periods for several months and suggesting that non-crop ticket values for the 2023 and 2024 compliance years have now converged.
A slew of trades had been heard for 2024 non crop tickets through the end of last week and beginning of this (Monday, November 6), with all heard traded at 15.5 pound sterlings per certificate, before trading also picked up on 2023 tickets – at the same price level.
“It shows that the market is probably genuinely 15.5 pounds for both 2023 and 2024… shows the market has reached a level, it’s the largest weekly volume of trade that we’ve seen for a while,” one trade source told Fastmarkets Agriculture.
A second source said that “people believed [tickets for 2024 were underpriced],” but the upward move on non-crop 2023 certificate prices represented a modest recovery after slipping to a four-year low of 15 pounds per certificate last week.
Sources ascribed the buying to different dynamics, with 2023 buying potentially driven by the relatively cheap price of single-count biofuels earlier in the obligation period, rather than the more impactful use of double-counted waste-based feedstocks.
“People buying on 2023s are people who probably have a larger obligation than they were calculating because they were probably blending more single count biodiesel than they had originally planned,” the first trade source said, while 2024 buying was more business as usual.
The first release of provisional 2023 UK government data showed a slight uptick in the use of crop-based biofuels as a means to meeting renewable fuel obligations, versus the 2022 values – with crop-based fuels typically single-counted feedstocks.
Relatively weak prices for crop-based biofuels, versus the typically double-counted waste-based feedstocks, and high diesel prices encouraged traders to target single-counted fuels.
The preliminary report for 2022 showed 141 million liters of crop-based biofuels had been supplied into the UK at the time of its publication – en route to a 1.12 billion liter contribution as per the most recent data.
By comparison, 2023’s first provisional report showed 333 million liters of single-count biofuels had been supplied, equating to 333 million crop-based renewable transport fuels certificates (RTFCs).
For 2023, that means crop-based biofuels equate to 55% of the total fuel supply currently validated and 28% of the total RTFCs generated.
Back at the same stage of 2022, crop-based biofuels contributed 54% of the total fuel supply and 27.2% of the total RTFCs generated – a trend that is likely to widen as the data is updated in the months ahead.
As of the most recent data set – the fifth provision 2022 data – crop-based fuels account for 20% of the total tickets generated and 65% of the total biofuel supply.
Fastmarkets data shows waste-based used cooking oil biodiesel (UCOME) has averaged a $152 per tonne premium rapeseed crop-based biodiesel (RME) for 2023, versus an average of just $88 per tonne in 2022, leading traders to pick up crop-based fuels when pricing made sense.
With 2023 bringing an uplift in both the total blending obligation and the waste-based contribution – up 0.7 percentage points to 14.22% and 0.65 percentage point increase to 9.578% respectively – an increase could have been expected.
Nonetheless, the overall contribution of crop-based biofuels was reduced at the beginning of 2023, from a 3.67% cap to 3.5%, and will continue to be reduced until it’s expected to be capped at 2% of the total fuel supply by 2032.
The move has brought 2023 tickets back into line with the incoming 2024 vintage – after the first 2024 assessments had put the new year at a half-penny discount to 2023.
But a broader collapse in biodiesel premiums for current blending reversed the relationship, dragging down 2023 ticket prices while 2024 tickets enjoyed some support – leaving 2023 tickets to trade at a half-penny discount to 2024.
With this week’s trading, the relationship has been reset with both years’ non-crop certificates trading at parity.
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