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 hits 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 organization for the 3rd time this year due to falling rates and also its expected sales volumes, sending the business’s share rate down 10%.

Neste stated a drop in the rate of regular 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 eco-friendly diesel has actually developed a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to impede the nascent industry.

Neste in a statement slashed the anticipated average comparable sales margin of its renewables unit to 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 business now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had predicted because the start of the year, it added.

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

“Renewable items’ sales costs have been negatively affected by a significant decline in (the) diesel rate during the third quarter,” Neste stated in a declaration.

“At the same time, waste and residue feedstock prices have not decreased and renewable item market value premiums have stayed weak,” the company added.

Industry executives and analysts have actually said quickly broadening Chinese biodiesel producers are seeking brand-new outlets in Asia for their exports, while Shell and BP have revealed 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 negative impact on biodiesel margins from a lower diesel rate was to be anticipated, Inderes expert Petri Gostowski said.

Neste’s share rate had 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)