Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel rates

(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 costs and likewise reduced its expected sales volumes, sending out the business’s share price down 10%.

Neste said a drop in the rate of routine 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 produced a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to impede the nascent market.

Neste in a declaration slashed the anticipated typical comparable sales margin of its renewables system 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 forecasted since the start of the year, it added.

A part of the volume cut originated from the production of sustainable air travel 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‘ sales prices have actually been adversely affected by a considerable decrease in (the) diesel price during the 3rd quarter,“ Neste said in a statement.

„At the exact same time, waste and residue feedstock costs have not reduced and eco-friendly product market cost premiums have stayed weak,“ the business included.

Industry executives and have actually stated rapidly expanding Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have announced they are pausing growth strategies in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable air travel fuel came as a surprise, the negative influence on biodiesel margins from a lower diesel cost was to be expected, Inderes expert Petri Gostowski stated.

Neste’s share cost 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)