Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes third cut to renewables service 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 falling costs and likewise lowered its expected sales volumes, sending the company's share rate down 10%.
Neste stated a drop in the price 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 produced a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hinder the nascent industry.
Neste in a statement slashed the expected average similar 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 company now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually predicted since 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 expected to offer between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste said.
"Renewable products' prices have actually been negatively affected by a significant reduction in (the) diesel cost throughout the third quarter," Neste said in a declaration.
"At the exact same time, waste and residue feedstock costs have not reduced and eco-friendly product market value premiums have actually stayed weak," the business included.
Industry executives and analysts have said quickly expanding Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually announced they are stopping briefly growth strategies in Europe.
While the cut in Neste's assistance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable impact on biodiesel margins from a lower diesel cost was to be anticipated, Inderes analyst Petri Gostowski said.
rate 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)