Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel rates

(Adds expert, background, information 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 company for the 3rd time this year due to falling costs and likewise decreased its expected sales volumes, sending the business’s share cost down 10%.

Neste said a drop in the cost of routine diesel had 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 created a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to restrain the nascent industry.

Neste in a statement slashed the anticipated typical equivalent sales margin of its renewables unit 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 expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually predicted given that 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 offer in between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen formerly, Neste said.

“Renewable items’ sales rates have actually been adversely impacted by a substantial decrease in (the) diesel price during the 3rd quarter,” Neste said in a statement.

“At the exact same time, waste and residue feedstock rates have actually not decreased and eco-friendly item market price premiums have actually stayed weak,” the business added.

Industry executives and analysts 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 growth 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 anticipated, Inderes expert Petri Gostowski stated.

Neste’s share rate had reversed some losses by 1037 GMT however stayed down 5.8% on the day and 48% lower year-to-date. (Reporting by Luoma, Essi Lehto and Boleslaw Lasocki; Editing by Terje Solsvik and Jan Harvey)