Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables service outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits 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 service for the third time this year due to falling costs and likewise lowered its anticipated sales volumes, sending out the business’s share rate down 10%.

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

A rush by U.S. fuel makers to recalibrate their plants to produce renewable diesel has produced a supply excess of low-emissions biofuels, hammering earnings margins for refiners and threatening to hamper the nascent industry.

Neste in a statement slashed the expected typical comparable 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 business now also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had predicted since the start of the year, it added.

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

“Renewable items’ sales rates have been negatively affected by a substantial decline in (the) diesel rate during the third quarter,” Neste stated in a statement.

“At the exact same time, waste and residue feedstock costs have actually not reduced and sustainable product market cost premiums have remained weak,” the business added.

Industry executives and analysts have actually said quickly expanding Chinese biodiesel producers are looking for 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 impact on biodiesel margins from a lower diesel cost was to be expected, Inderes expert Petri Gostowski stated.

Neste’s share price had actually reversed some losses by 1037 GMT however 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)