Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables company outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel costs

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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 3rd time this year due to falling prices and likewise lowered its expected sales volumes, sending the company’s share rate down 10%.

Neste stated a drop in the price of regular diesel had actually impacted 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 eco-friendly diesel has developed a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to the nascent market.

Neste in a statement slashed the expected typical comparable 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 anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually predicted since the start of the year, it added.

A part of the volume cut originated from the production of sustainable air travel fuel, of which it is now expected to sell in between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen formerly, Neste stated.

« Renewable products’ sales costs have actually been adversely impacted by a significant decline in (the) diesel cost during the 3rd quarter, » Neste stated in a statement.

« At the same time, waste and residue feedstock prices have not decreased and sustainable item market price premiums have stayed weak, » the business added.

Industry executives and analysts have actually stated rapidly expanding Chinese biodiesel producers are looking for new outlets in Asia for their exports, while Shell and BP have actually revealed they are pausing growth plans in Europe.

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

Neste’s share price had reversed some losses by 1037 GMT however stayed 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)