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 costs

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By Elviira Luoma and Essi Lehto

HELSINKI, Sept 11 (Reuters) – Finnish on Wednesday cut the margin outlook for its biofuel business for the 3rd time this year due to falling rates and also lowered its expected sales volumes, sending out the business’s share cost down 10%.

Neste said a drop in the price 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 actually developed a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to impede the nascent market.

Neste in a declaration slashed the anticipated typical similar sales margin of its renewables unit to between $360-$480 per tonne of biofuel, down from $480-$580 per tonne seen in July and well 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 predicted 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 expected to sell between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste said.

“Renewable items’ sales rates have actually been negatively affected by a significant decline in (the) diesel price during the third quarter,” Neste stated in a declaration.

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

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

While the cut in Neste’s assistance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable influence on biodiesel margins from a lower diesel cost was to be expected, Inderes expert Petri Gostowski stated.

Neste’s share cost had 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)