Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables company outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel costs

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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 business for the third time this year due to falling rates and likewise decreased its anticipated sales volumes, sending the business’s share price 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 renewable diesel has actually produced a supply excess of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent market.

Neste in a statement slashed the anticipated average comparable 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 listed below the $600-$800 seen in February.

The company now also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually anticipated since the start of the year, it added.

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

“Renewable products’ list prices have actually been adversely affected by a significant decrease in (the) diesel rate 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 cost premiums have remained weak,” the business added.

Industry executives and experts have said quickly broadening Chinese biodiesel producers are looking for 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 on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable influence on biodiesel margins from a lower diesel rate was to be anticipated, Inderes expert Petri Gostowski said.

Neste’s share price 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)