Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel prices

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By Elviira Luoma and Essi Lehto

HELSINKI, Sept 11 (Reuters) – Finnish Neste on Wednesday cut the margin outlook for its biofuel organization for the third time this year due to falling costs and likewise reduced its expected sales volumes, sending out the company’s share rate down 10%.

Neste said a drop in the price of routine diesel had actually impacted 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 eco-friendly diesel has produced a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to restrain the nascent industry.

Neste in a declaration slashed the expected average equivalent sales margin of its renewables system to in between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well listed below the $600-$800 seen in February.

The company now likewise anticipates 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 included.

A part of the volume cut came from the production of sustainable air travel fuel, of which it is now expected to sell between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable products’ list prices have been negatively affected by a significant reduction in (the) diesel cost during the 3rd quarter,” Neste stated in a statement.

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

Industry executives and experts have actually stated quickly expanding Chinese biodiesel manufacturers are seeking brand-new outlets in Asia for their exports, while Shell and BP have actually announced they are pausing expansion strategies in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel cost was to be anticipated, Inderes expert Petri Gostowski said.

Neste’s share rate had actually 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)