Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables company outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel prices

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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 prices and also reduced its expected sales volumes, sending the business’s share cost down 10%.

a drop in the rate of routine diesel had affected what it can charge for the biofuel it makes in Europe and Singapore, while input expenses for waste and residue feedstock stayed high.

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

Neste in a declaration slashed the expected 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 listed below the $600-$800 seen in February.

The company now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had anticipated because 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 between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable items’ list prices have actually been adversely impacted by a significant reduction in (the) diesel rate during the third quarter,” Neste said in a statement.

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

Industry executives and analysts have stated rapidly expanding Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have announced they are pausing 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 cost was to be expected, Inderes expert Petri Gostowski said.

Neste’s share rate had 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)