Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel rates

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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 business for the 3rd time this year due to falling costs and likewise lowered its expected sales volumes, sending the business’s share price down 10%.

Neste stated a drop in the price of regular diesel had actually affected what it can charge for the 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 renewable diesel has actually created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to impede the nascent market.

Neste in a declaration slashed the expected typical equivalent sales margin of its renewables system to in between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well listed below the $600-$800 seen in February.

The business 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 anticipated because the start of the year, it included.

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

“Renewable items’ prices have been negatively impacted by a significant reduction in (the) diesel price during the 3rd quarter,” Neste said in a statement.

“At the same time, waste and residue feedstock rates have actually not decreased and sustainable item market value premiums have remained weak,” the business included.

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

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

Neste’s share rate had actually 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)