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 hits biofuel costs

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By Elviira Luoma and Essi Lehto

HELSINKI, Sept 11 (Reuters) – Finnish 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 company’s share rate down 10%.

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

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

Neste in a declaration slashed the anticipated typical similar sales margin of its renewables system to in 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 business now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually anticipated considering that the start of the year, it added.

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

“Renewable products’ list prices have been adversely impacted by a significant decrease in (the) diesel price during the 3rd quarter,” Neste stated in a declaration.

“At the very same time, waste and residue feedstock costs have actually not decreased and renewable product market value premiums have stayed weak,” the company included.

Industry executives and analysts have actually stated rapidly broadening Chinese biodiesel manufacturers are seeking new outlets in Asia for their exports, while Shell and BP have announced they are pausing expansion plans in Europe.

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

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