Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables service outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel rates

(Adds expert, background, detail in paragraphs 2-3, 9-11)

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 also reduced its expected sales volumes, sending the business’s share rate down 10%.

Neste said a drop in the price of regular diesel had 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 eco-friendly diesel has actually developed a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent industry.

Neste in a declaration slashed the anticipated 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 below the $600-$800 seen in February.

The business now also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually forecasted because 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 sell between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable products’ list prices have actually been adversely impacted by a considerable decrease in (the) diesel price during the 3rd quarter,” Neste stated in a statement.

“At the exact same time, waste and residue feedstock costs have not decreased and renewable item market rate premiums have stayed weak,” the business included.

Industry executives and experts have actually said rapidly broadening Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have actually announced they are stopping briefly expansion strategies in Europe.

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

Neste’s share cost had 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)