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 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 company for the third time this year due to falling rates and also reduced its anticipated sales volumes, sending out the company's share rate down 10%.
Neste stated a drop in the price of routine diesel had impacted 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 eco-friendly diesel has created a supply excess of low-emissions biofuels, hammering earnings margins for refiners and to hamper the nascent industry.
Neste in a declaration slashed the expected average equivalent 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 business now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had forecasted since 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 anticipated to offer in between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen formerly, Neste said.
"Renewable products' sales prices have actually been negatively impacted by a significant decline in (the) diesel price during the 3rd quarter," Neste said in a declaration.
"At the same time, waste and residue feedstock rates have not decreased and renewable item market rate premiums have actually stayed weak," the company added.
Industry executives and analysts have stated quickly expanding Chinese biodiesel producers are seeking brand-new outlets in Asia for their exports, while Shell and BP have actually revealed they are pausing growth strategies in Europe.
While the cut in Neste's assistance on sales volumes of sustainable aviation fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel rate was to be expected, Inderes expert Petri Gostowski stated.
Neste's share rate 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)