Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables service 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) refiner Neste on Wednesday cut the margin outlook for its biofuel business 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 stated a drop in the rate of regular 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 created a supply excess of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent market.

Neste in a statement slashed the expected typical comparable sales margin of its renewables unit to in 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 business now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had anticipated 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 between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen previously, Neste stated.

“Renewable items’ sales costs have actually been negatively affected by a significant reduction in (the) diesel price throughout the 3rd quarter,” Neste said in a declaration.

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

Industry executives and experts have actually said rapidly expanding Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have announced they are stopping briefly growth strategies 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 price had 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)