Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables service 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 company for the third time this year due to falling costs and also lowered its expected sales volumes, sending the business’s share rate 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 remained high.

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

Neste in a declaration slashed the anticipated average comparable 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 instead of the 4.4 million it had anticipated given 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 between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste said.

“Renewable items’ sales costs have been negatively impacted by a considerable decrease in (the) diesel price during the third quarter,” Neste said in a declaration.

“At the same time, waste and residue feedstock costs have not decreased and eco-friendly product market rate premiums have actually remained weak,” the business 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 growth plans in Europe.

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

Neste’s share cost had actually reversed 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)