Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables service 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 refiner Neste on Wednesday cut the margin outlook for its biofuel company for the third time this year due to falling prices and also reduced its expected sales volumes, sending out the company’s share rate 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 remained 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 profit margins for refiners and threatening to restrain the nascent market.

Neste in a statement slashed the expected average equivalent 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 listed 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 instead of the 4.4 million it had predicted considering that 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 offer in between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable items’ prices have been negatively impacted by a significant decrease in (the) diesel cost during the third quarter,” Neste said in a declaration.

“At the exact same time, waste and residue feedstock prices have not reduced and eco-friendly product market price premiums have actually stayed weak,” the business included.

Industry executives and analysts have actually stated quickly expanding Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have revealed they are stopping briefly expansion plans in Europe.

While the cut in Neste’s assistance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel cost was to be anticipated, Inderes expert Petri Gostowski said.

Neste’s share cost had 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)