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 organization for the 3rd time this year due to falling rates and likewise reduced its anticipated sales volumes, sending the company’s share price down 10%.

Neste said a drop in the price of regular diesel had affected what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock remained high.

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

Neste in a declaration slashed the anticipated typical equivalent 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 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 actually since the start of the year, it added.

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

“Renewable products’ sales rates have been adversely impacted by a considerable decline in (the) diesel price throughout the 3rd quarter,” Neste stated in a declaration.

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

Industry executives and analysts have stated rapidly expanding Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have 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 effect on biodiesel margins from a lower diesel cost was to be anticipated, Inderes expert Petri Gostowski stated.

Neste’s share rate had 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)