Hydrogen Constraints Expose Overlooked Link in US Gulf Coast Renewable Diesel Feedstock Markets

By Sarah Schneider (Fastmarkets) Reports of hydrogen supply constraints along the US Gulf Coast are drawing attention to a less visible link in the renewable diesel (RD) supply chain, as market participants assess how disruptions upstream of fuel production could affect demand and logistics for used cooking oil (UCO), tallow and other fats and oils.

Market participants this week reported hydrogen supply constraints were beginning to affect renewable fuel operations in the Gulf, although accounts differed over the number of facilities affected, the extent of any production curtailments, and how long the disruption could last.

Estimates ranged from a relatively short-lived interruption to around two weeks, with some participants expecting operations to normalize relatively quickly and others anticipating a more prolonged impact. Fastmarkets could not independently confirm the operational status of individual facilities.

Still, the issue has attracted attention in feedstock markets because hydrogen is essential to renewable diesel production. Commercial plants primarily use hydrotreating, in which fats and oils react with hydrogen under elevated temperatures and pressures to produce hydrocarbon fuels.

Technical estimates indicate the process can require roughly 25-50 kg of hydrogen for every tonne of feedstock processed, depending on feedstock composition, process configuration and operating conditions. At commercial scale, those requirements add up quickly, leaving renewable diesel producers heavily dependent on a steady hydrogen supply.

A disruption in hydrogen supply can therefore constrain feedstock consumption even when there is no shortage of the feedstocks themselves.

For fats and oils markets, the most immediate demand effect is relatively straightforward: if renewable diesel production is reduced because of insufficient hydrogen, plants have less immediate need for feedstock.

A significant share of fats and oils moves from rendering and production regions into the Gulf by rail, and under normal operating conditions, railcars are unloaded and returned to origin for another load.

But if plants reduce operating rates and delay incoming feedstocks, those equipment cycles can slow.

Unlike UCO, tallow or DCO, which typically arrive at individual renewable fuel facilities by rail, truck, barge or vessel, hydrogen is produced upstream and transported through pipeline networks connecting producers with downstream users.

Those networks are particularly extensive along the Gulf Coast, home to the largest concentration of hydrogen infrastructure in the US alongside the region’s major refining and petrochemical industry.

Air Products’ Gulf Coast hydrogen network, for example, extends more than 600 miles from Texas into Louisiana and connects more than 20 hydrogen production facilities.

The interconnected system is designed to provide flexibility by moving hydrogen among multiple producers and consumers as supply and demand change. But that interdependence also means a constraint upstream can potentially affect more than one downstream facility.

That possibility has fueled market discussion of a broader Gulf hydrogen network issue rather than an isolated disruption at a single renewable diesel plant. READ MORE