Company makes 3rd cut to renewables service outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel prices

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By 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 rates and likewise reduced its anticipated sales volumes, sending out the business’s share cost down 10%.

Neste stated a drop in the price of regular diesel had actually affected 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 eco-friendly diesel has actually created a supply glut of low-emissions biofuels, hammering earnings margins for refiners and threatening to restrain the nascent market.

Neste in a declaration slashed the expected typical comparable sales margin of its renewables system 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 business now likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had anticipated considering that the start of the year, it added.

A part of the volume cut originated from the production of sustainable air travel 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 products’ list prices have actually been negatively impacted by a substantial reduction in (the) diesel price throughout the 3rd quarter,” Neste stated in a declaration.

“At the very same time, waste and residue feedstock costs have actually not decreased and renewable product market cost premiums have stayed weak,” the company included.

Industry executives and analysts have said quickly expanding Chinese biodiesel manufacturers are seeking brand-new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion strategies in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel cost was to be expected, Inderes expert Petri Gostowski said.

Neste’s share price had reversed some losses by 1037 GMT however remained down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki