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 strikes 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 company for the 3rd time this year due to falling rates and likewise lowered its expected sales volumes, sending the rate down 10%.

Neste stated a drop in the rate of routine diesel had actually impacted 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 sustainable diesel has created a supply glut of low-emissions biofuels, hammering earnings margins for refiners and threatening to hamper the nascent industry.

Neste in a declaration slashed the expected average comparable 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 likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had forecasted because the start of the year, it added.

A part of the volume cut came 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 formerly, Neste said.

“Renewable items’ prices have been adversely affected by a significant decrease in (the) diesel cost during the 3rd quarter,” Neste said in a declaration.

“At the exact same time, waste and residue feedstock rates have actually not decreased and sustainable item market value premiums have stayed weak,” the business included.

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

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

Neste’s share cost 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)