Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes third cut to renewables company outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits biofuel costs
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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 service for the third time this year due to and also decreased its expected sales volumes, sending out the business's share cost down 10%.
Neste said a drop in the cost of routine 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 stayed high.
A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has developed a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent industry.
Neste in a statement slashed the anticipated average comparable sales margin of its renewables system to between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well listed 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 predicted considering that 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 offer in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable products' list prices have actually been negatively impacted by a significant decrease in (the) diesel rate throughout the 3rd quarter," Neste stated in a statement.
"At the exact same time, waste and residue feedstock rates have not reduced and renewable item market value premiums have remained weak," the business included.
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 aviation fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel cost was to be anticipated, Inderes analyst 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; Editing by Terje Solsvik and Jan Harvey)