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 business for the third time this year due to falling rates and also reduced its expected sales volumes, sending the business's share rate down 10%.
Neste said a drop in the cost of routine 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 eco-friendly diesel has actually produced a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to restrain the nascent industry.
Neste in a statement slashed the expected 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 business now likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually anticipated given that 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 expected to offer in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste stated.
"Renewable products' list prices have actually been adversely affected by a substantial reduction in (the) diesel cost during the third quarter," Neste stated in a statement.
"At the exact same time, waste and residue feedstock costs have not reduced and sustainable item market price premiums have actually remained weak," the business added.
Industry executives and analysts have actually said rapidly broadening Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have announced they are pausing growth plans in Europe.
While the cut in Neste's guidance on sales volumes of sustainable air travel fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel rate was to be anticipated, Inderes expert Petri Gostowski stated.
Neste's share price 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)