Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes 3rd cut to renewables organization outlook this year
Reduces both margin and volume outlook
Weaker diesel market strikes biofuel rates
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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 rates and likewise decreased its expected sales volumes, sending out the company's share price down 10%.
Neste stated a drop in the cost 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 sustainable diesel has actually created a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to hinder the nascent market.
Neste in a declaration slashed the expected average 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 below the $600-$800 seen in February.
The company now also anticipates renewables-based sales in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually anticipated considering that the start of the year, it included.
A part of the volume cut originated from the production of sustainable aviation fuel, of which it is now anticipated to offer 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 substantial decrease in (the) diesel price during the third quarter," Neste stated in a statement.
"At the same time, waste and residue feedstock rates have not reduced and sustainable product market cost premiums have actually remained weak," the business included.
Industry executives and analysts have stated rapidly expanding Chinese biodiesel manufacturers are seeking 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 effect on biodiesel margins from a lower diesel rate was to be anticipated, Inderes analyst Petri Gostowski said.
Neste's share price had actually reversed some losses by 1037 GMT but remained 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)