Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes third cut to renewables business 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) - Finnish refiner Neste on Wednesday cut the margin outlook for its biofuel organization for the 3rd time this year due to falling rates and likewise decreased its anticipated sales volumes, sending out the business's share cost down 10%.
a drop in the cost of routine diesel had actually 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 sustainable diesel has actually produced a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent industry.
Neste in a declaration slashed the expected typical comparable sales margin of its renewables unit to in 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 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 anticipated considering 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 formerly, Neste said.
"Renewable products' sales prices have been adversely impacted by a substantial reduction in (the) diesel cost throughout the 3rd quarter," Neste said in a statement.
"At the very same time, waste and residue feedstock prices have actually not decreased and renewable product market cost premiums have remained weak," the company included.
Industry executives and analysts have actually said quickly expanding Chinese biodiesel producers are seeking brand-new outlets in Asia for their exports, while Shell and BP have announced they are stopping briefly expansion strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable influence on biodiesel margins from a lower diesel rate was to be anticipated, Inderes expert Petri Gostowski stated.
Neste's share price had actually 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)