Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes third cut to renewables business outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits biofuel rates
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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 third time this year due to falling costs and likewise decreased its anticipated sales volumes, sending out the business's share cost down 10%.
Neste said a drop in the cost 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 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 earnings margins for refiners and threatening to restrain the nascent industry.
Neste in a statement slashed the anticipated average comparable sales margin of its renewables unit 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 also anticipates renewables-based in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had anticipated given that the start of the year, it added.
A part of the volume cut came from the production of sustainable aviation fuel, of which it is now anticipated 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' list prices have been adversely impacted by a substantial decline in (the) diesel price during the 3rd quarter," Neste stated in a declaration.
"At the exact same time, waste and residue feedstock costs have actually not reduced and renewable product market value premiums have actually stayed weak," the company included.
Industry executives and experts have stated quickly expanding Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have revealed they are stopping briefly growth strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski stated.
Neste's share rate had reversed some losses by 1037 GMT however stayed 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)