Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to 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 company for the third time this year due to falling rates and likewise reduced its expected sales volumes, sending out the business’s share cost down 10%.

Neste stated a drop in the price of regular 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 developed a supply glut of low-emissions biofuels, hammering earnings margins for refiners and threatening to restrain the nascent market.

Neste in a statement slashed the expected average similar sales margin of its renewables system to in between $360-$480 per tonne of biofuel, down from $480-$580 per tonne seen in July and well below the $600-$800 seen in February.

The business now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually anticipated 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 between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste said.

“Renewable items’ prices have been negatively affected by a substantial decline in (the) diesel price throughout the third quarter,” Neste stated in a statement.

“At the exact same time, waste and residue feedstock rates have actually not reduced and renewable product market value premiums have actually remained weak,” the company included.

Industry executives and experts have actually said quickly expanding Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually revealed they are stopping briefly expansion plans in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel price was to be anticipated, Inderes analyst Petri Gostowski said.

Neste’s share rate had reversed some losses by 1037 GMT but 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)