Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes third cut to renewables company outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits biofuel costs
(Adds expert, background, detail 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 lowered its expected sales volumes, sending the company’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 stayed high.
A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has actually developed a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to restrain the nascent industry.
Neste in a declaration slashed the anticipated average similar sales margin of its renewables system 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 company 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 because the start of the year, it included.
A part of the volume cut came from the production of sustainable air travel fuel, of which it is now anticipated to sell in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste said.
“Renewable items’ list prices have actually been adversely impacted by a significant decline in (the) diesel rate throughout the third quarter,” Neste stated in a declaration.
“At the exact same time, waste and residue feedstock rates have actually not reduced and renewable item market value premiums have actually stayed weak,” the company included.
Industry executives and experts have stated rapidly expanding Chinese biodiesel manufacturers are seeking brand-new in Asia for their exports, while Shell and BP have actually revealed they are pausing expansion strategies in Europe.
While the cut in Neste’s assistance on sales volumes of sustainable aviation fuel came as a surprise, the negative impact on biodiesel margins from a lower diesel price was to be expected, 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)