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 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 organization for the third time this year due to falling prices and also reduced its anticipated sales volumes, sending out the business’s share price down 10%.

Neste said a drop in the cost of regular diesel had impacted what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and stayed high.

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

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

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

“Renewable products’ prices have actually been negatively affected by a significant decrease in (the) diesel rate throughout the third quarter,” Neste said in a statement.

“At the same time, waste and residue feedstock prices have not reduced and eco-friendly item market rate premiums have actually remained weak,” the company included.

Industry executives and experts have stated quickly broadening Chinese biodiesel manufacturers are seeking new outlets in Asia for their exports, while Shell and BP have actually revealed they are stopping briefly growth strategies in Europe.

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

Neste’s share price had actually reversed some losses by 1037 GMT but 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)