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 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 lowered its anticipated sales volumes, sending out the business’s share rate down 10%.

Neste said a drop in the price of regular diesel had affected what it can charge for the biofuel it makes in Europe and Singapore, while input expenses for waste and residue feedstock stayed high.

A rush by U.S. fuel makers to recalibrate their plants to produce eco-friendly diesel has created a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent industry.

Neste in a statement slashed the expected average 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 listed 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 rather of the 4.4 million it had actually forecasted because the start of the year, it included.

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

“Renewable items’ prices have actually been adversely affected by a substantial decline in (the) diesel cost during the 3rd quarter,” Neste stated in a declaration.

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

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

While the cut in Neste’s guidance 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 anticipated, Inderes analyst Petri Gostowski said.

Neste’s share cost had actually 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)