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 company for the third time this year due to falling costs and also reduced its anticipated sales volumes, sending the company's share price down 10%.
Neste said a drop in the price of regular diesel had actually impacted what it can charge for the biofuel it makes in Europe and Singapore, while input expenses 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 developed a supply excess of low-emissions biofuels, hammering revenue margins for refiners and threatening to restrain the nascent market.
Neste in a declaration slashed the expected average similar 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 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 actually predicted since the start of the year, it included.
A part of the volume cut originated 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 in between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable products' list prices have been adversely impacted by a substantial reduction in (the) diesel price during the third quarter," Neste stated in a declaration.
"At the very same time, waste and residue feedstock rates have not decreased and sustainable product market value premiums have actually remained weak," the company added.
Industry executives and analysts have said rapidly broadening Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have revealed they are pausing growth strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the negative effect on from a lower diesel rate was to be expected, Inderes analyst Petri Gostowski said.
Neste's share cost 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)