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 hits biofuel prices

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By Elviira Luoma and Essi Lehto

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

Neste stated a drop in the rate of routine 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 sustainable diesel has actually produced a supply excess of low-emissions biofuels, hammering earnings margins for refiners and threatening to restrain the nascent market.

Neste in a statement slashed the expected typical similar sales margin of its renewables system 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 likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually forecasted considering that 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 offer in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable items’ sales prices have been negatively affected by a considerable decline in (the) diesel price during the 3rd quarter,” Neste said in a statement.

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

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

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

Neste’s share price had actually reversed some losses by 1037 GMT but 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)