Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes 3rd cut to renewables business outlook this year
Reduces both margin and volume outlook
Weaker diesel market strikes biofuel costs
(Adds analyst, 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 service for the 3rd time this year due to falling costs and also lowered its anticipated sales volumes, sending out the business's share cost down 10%.
Neste said a drop in the cost 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 stayed high.
A rush by U.S. fuel makers to recalibrate their plants to produce renewable diesel has actually produced a supply excess of low-emissions biofuels, hammering earnings margins for refiners and threatening to hinder the nascent industry.
Neste in a statement slashed the anticipated typical comparable sales margin of its renewables unit to 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 expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually 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 expected to sell in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable items' prices have actually been adversely affected by a substantial decline in (the) diesel cost throughout the third quarter," Neste stated in a statement.
"At the same time, waste and residue feedstock prices have actually not decreased and renewable product market value premiums have actually remained weak," the business added.
Industry executives and experts have said quickly broadening 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 assistance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski stated.
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 Luoma, Essi Lehto and Boleslaw Lasocki; Editing by Terje Solsvik and Jan Harvey)