Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables service outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits 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 company for the third time this year due to falling prices and also decreased its expected sales volumes, sending out the business’s share cost down 10%.

Neste stated a drop in the cost of regular 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 stayed high.

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

Neste in a declaration slashed the expected average similar 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 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 predicted given that the start of the year, it included.

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

“Renewable products’ prices have been adversely affected by a significant decline in (the) diesel price during the third quarter,” Neste stated in a declaration.

“At the very same time, waste and residue feedstock costs have actually not decreased and eco-friendly product market price premiums have stayed weak,” the company included.

Industry executives and analysts have actually said rapidly broadening Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have announced they are pausing expansion strategies in Europe.

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

Neste’s share cost 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)