Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel prices

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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 service for the 3rd time this year due to falling rates and likewise lowered its anticipated sales volumes, sending the business’s share rate down 10%.

Neste stated a drop in the cost 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 remained high.

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

Neste in a declaration slashed the anticipated average comparable 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 below the $600-$800 seen in February.

The business now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually anticipated because the start of the year, it included.

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

“Renewable items’ sales costs have actually been adversely affected by a significant reduction in (the) diesel rate throughout the third quarter,” Neste stated in a statement.

“At the very same time, waste and residue feedstock rates have not decreased and renewable item market price premiums have remained weak,” the company included.

Industry executives and experts have said rapidly expanding Chinese biodiesel manufacturers are seeking brand-new outlets in Asia for their exports, while Shell and BP have revealed they are pausing growth strategies in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable air travel fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel price was to be expected, Inderes expert 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)