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

(Adds analyst, background, information 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 company for the 3rd time this year due to falling costs and also reduced its anticipated sales volumes, sending out the business’s share price down 10%.

Neste stated a drop in the rate of routine diesel had actually affected what it can charge for the biofuel it makes in Europe and Singapore, while input expenses 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 of low-emissions biofuels, hammering earnings margins for refiners and threatening to hinder the nascent industry.

Neste in a declaration slashed the expected 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 business now likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had 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 in between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable products’ sales costs have actually been negatively affected by a substantial reduction in (the) diesel price during the third quarter,” Neste stated in a statement.

“At the exact same time, waste and residue feedstock costs have actually not decreased and sustainable item market value premiums have remained weak,” the business added.

Industry executives and experts have stated quickly expanding Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have 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 influence 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 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)