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 prices

(Adds expert, background, detail 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 business for the third time this year due to falling prices and also decreased its anticipated sales volumes, sending the business’s share price down 10%.

Neste stated a drop in the cost of routine diesel had actually affected what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock remained high.

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

Neste in a statement slashed the expected typical 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 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 predicted because the start of the year, it added.

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

“Renewable products’ list prices have been adversely impacted by a considerable decline in (the) diesel price throughout the third quarter,” Neste said in a statement.

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

Industry executives and analysts have said rapidly broadening Chinese biodiesel manufacturers are seeking brand-new outlets in Asia for their exports, while Shell and BP have actually announced they are pausing growth plans 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 rate was to be expected, Inderes expert Petri Gostowski said.

cost had actually reversed some losses by 1037 GMT but 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)