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 costs

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By Elviira Luoma and Essi Lehto

HELSINKI, Sept 11 (Reuters) refiner Neste on Wednesday cut the margin outlook for its biofuel service for the third time this year due to falling costs and also lowered its anticipated sales volumes, sending out the business’s share price down 10%.

Neste said a drop in the price of routine diesel had 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 glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent market.

Neste in a statement slashed the anticipated typical similar 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 expects 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 included.

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

«Renewable items’ list prices have been adversely impacted by a considerable decrease in (the) diesel cost throughout the third quarter,» Neste stated in a statement.

«At the very same time, waste and residue feedstock costs have not reduced and eco-friendly product market value premiums have actually remained weak,» the company added.

Industry executives and experts have actually said quickly expanding Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion strategies in Europe.

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

Neste’s share price 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)