Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel rates

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

Neste said 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 costs 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 revenue margins for refiners and threatening to hinder the nascent market.

Neste in a declaration slashed the expected 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 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 anticipated because the start of the year, it added.

A part of the volume cut originated from the production of sustainable aviation 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 stated.

“Renewable products’ prices have been adversely affected by a significant reduction in (the) diesel rate throughout the 3rd quarter,” Neste stated in a declaration.

“At the exact same time, waste and residue feedstock costs have not decreased and eco-friendly product market cost premiums have actually stayed weak,” the business added.

Industry executives and experts have actually said rapidly expanding Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have revealed they are stopping briefly growth plans in Europe.

While the cut in Neste’s assistance on sales volumes of sustainable air travel fuel came as a surprise, the negative impact on biodiesel margins from a lower diesel cost was to be anticipated, Inderes analyst 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)