Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes 3rd 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 for its biofuel company for the third time this year due to falling prices and also reduced its expected sales volumes, sending the company's share rate down 10%.
Neste said a drop in the cost of routine diesel had 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 sustainable diesel has actually created 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 anticipated average equivalent sales margin of its renewables unit to in 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 also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had anticipated since the start of the year, it included.
A part of the volume cut originated from the production of sustainable aviation fuel, of which it is now expected to sell in between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen formerly, Neste said.
"Renewable products' prices have been negatively impacted by a substantial decline in (the) diesel rate throughout the third quarter," Neste stated in a statement.
"At the same time, waste and residue feedstock rates have actually not reduced and sustainable product market price premiums have actually stayed weak," the company added.
Industry executives and analysts have actually said quickly broadening Chinese biodiesel producers are looking for 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 air travel fuel came as a surprise, the negative influence on biodiesel margins from a lower diesel rate was to be expected, Inderes analyst Petri Gostowski stated.
Neste's share cost had 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)