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 third time this year due to falling costs and also decreased its anticipated sales volumes, sending the company’s share cost down 10%.

Neste said a drop in the price of routine diesel had affected 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 developed a supply excess of low-emissions biofuels, hammering earnings margins for refiners and threatening to restrain the .

Neste in a statement slashed the anticipated average equivalent 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 company now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had anticipated given that the start of the year, it included.

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

“Renewable products’ prices have been negatively affected by a significant decline in (the) diesel cost during the 3rd quarter,” Neste stated in a statement.

“At the very same time, waste and residue feedstock prices have actually not reduced and sustainable item market cost premiums have actually remained weak,” the company included.

Industry executives and analysts have actually said quickly expanding Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have actually announced they are pausing growth plans 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 cost was to be expected, Inderes analyst Petri Gostowski stated.

Neste’s share rate had actually 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)