Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel prices

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By Elviira Luoma and Essi Lehto

HELSINKI, Sept 11 (Reuters) – Finnish refiner Neste on Wednesday cut the margin outlook for its biofuel company for the third time this year due to falling rates and likewise reduced its anticipated sales volumes, sending out the company’s share cost down 10%.

Neste stated a drop in the cost of routine diesel had affected what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock stayed high.

A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has actually developed a supply glut of low-emissions biofuels, hammering earnings margins for refiners and threatening to impede the nascent industry.

Neste in a declaration slashed the anticipated typical similar sales margin of its renewables unit to between $360-$480 per tonne of biofuel, down from $480-$580 per tonne seen in July and well below the $600-$800 seen in February.

The company now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had anticipated given that the start of the year, it added.

A part of the volume cut came from the production of sustainable aviation fuel, of which it is now expected to offer in between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen previously, Neste said.

« Renewable items’ prices have been negatively impacted by a substantial decline in (the) diesel rate during the third quarter, » Neste said in a declaration.

« At the exact same time, waste and residue feedstock rates have not decreased and eco-friendly product market cost premiums have actually remained weak, » the business added.

Industry executives and analysts have said quickly broadening Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually revealed they are stopping briefly growth strategies in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable air travel fuel came as a surprise, the negative effect on biodiesel margins from a rate was to be expected, Inderes expert Petri Gostowski stated.

Neste’s share rate had reversed some losses by 1037 GMT but remained down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki; Editing by Terje Solsvik and Jan Harvey)