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 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 organization for the third time this year due to falling costs and likewise reduced its volumes, sending out the company’s share cost down 10%.

Neste stated a drop in the cost of regular diesel had actually affected what it can charge for the biofuel 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 sustainable diesel has produced a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to impede the nascent industry.

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

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

“Renewable products’ sales costs have been negatively impacted by a considerable reduction in (the) diesel price during the third quarter,” Neste said in a declaration.

“At the exact same time, waste and residue feedstock prices have actually not decreased and eco-friendly product market value premiums have actually remained weak,” the company included.

Industry executives and experts have actually stated quickly broadening Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually revealed they are pausing expansion strategies in Europe.

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

Neste’s share cost 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)