Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables company outlook this year

Reduces both margin and volume outlook

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 business for the 3rd time this year due to falling prices and likewise lowered its anticipated sales volumes, sending out the company’s share price down 10%.

Neste stated a drop in the cost of regular diesel had impacted what it can charge for the biofuel it makes in Europe and Singapore, while input costs 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 earnings margins for refiners and threatening to impede the nascent industry.

Neste in a statement slashed the anticipated average equivalent sales margin of its renewables unit to 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 anticipated 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 expected to sell between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste stated.

«Renewable products’ list prices have been negatively affected by a substantial decrease in (the) diesel price throughout the third quarter,» Neste stated in a declaration.

«At the same time, waste and residue feedstock rates have not decreased and renewable item market cost premiums have stayed weak,» the company added.

Industry executives and experts have actually stated rapidly expanding Chinese biodiesel producers are looking for new outlets in Asia for their exports, while Shell and BP have announced they are pausing growth strategies in Europe.

While the cut in Neste’s guidance 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 anticipated, Inderes expert 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)