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 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 company for the third time this year due to falling rates and likewise lowered its expected sales volumes, sending the business's share price down 10%.
Neste stated a drop in the rate of regular diesel had actually impacted 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 excess of low-emissions biofuels, hammering earnings margins for refiners and threatening to hamper the nascent market.
Neste in a declaration slashed the anticipated typical 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 because 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 to offer between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen formerly, Neste said.
"Renewable items' prices have actually been adversely affected by a considerable decline in (the) diesel cost throughout the third quarter," Neste stated in a declaration.
"At the very same time, waste and residue feedstock costs have not reduced and sustainable product market value premiums have stayed weak," the business added.
Industry executives and analysts have actually stated quickly expanding Chinese biodiesel producers are seeking new outlets 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 air travel fuel came as a surprise, the negative influence on biodiesel margins from a lower diesel rate was to be anticipated, Inderes analyst Petri Gostowski said.
Neste's share price had 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)