Company makes 3rd cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes 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 organization for the 3rd time this year due to falling costs and likewise reduced its anticipated sales volumes, sending the company’s share rate down 10%.

Neste stated a drop in the rate of regular diesel had 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 actually created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent industry.

Neste in a statement slashed the anticipated typical equivalent sales margin of its renewables unit to in 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 also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually forecasted given that the start of the year, it included.

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 in between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable items’ prices have actually been negatively affected by a significant reduction in (the) diesel rate throughout the third quarter,” Neste stated in a statement.

“At the very same time, waste and residue feedstock rates have actually not reduced and eco-friendly product market rate premiums have stayed weak,” the business included.

Industry executives and analysts have actually said quickly broadening Chinese biodiesel manufacturers are looking for brand-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 assistance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable impact on biodiesel margins from a lower diesel rate was to be expected, Inderes expert stated.

Neste’s share price 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