Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes 3rd cut to renewables service outlook this year
both margin and volume outlook
Weaker diesel market hits biofuel rates
(Adds expert, background, information in paragraphs 2-3, 9-11)
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 costs and also decreased its expected sales volumes, sending 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 expenses for waste and residue feedstock remained high.
A rush by U.S. fuel makers to recalibrate their plants to produce renewable diesel has produced a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to restrain the nascent market.
Neste in a statement slashed the expected average similar 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 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 forecasted since the start of the year, it added.
A part of the volume cut originated from the production of sustainable aviation fuel, of which it is now expected to sell in between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen formerly, Neste stated.
"Renewable products' sales rates have been adversely affected by a significant reduction in (the) diesel cost throughout the 3rd quarter," Neste said in a statement.
"At the exact same time, waste and residue feedstock costs have not decreased and renewable item market value premiums have stayed weak," the company added.
Industry executives and analysts have stated quickly broadening Chinese biodiesel manufacturers are looking for brand-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 assistance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable influence on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski said.
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)