Mission NewEnergy Ltd

Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables organization 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 service for the third time this year due to falling costs and also reduced its expected sales volumes, sending out the business’s share price down 10%.

Neste said a drop in the price of routine diesel had affected 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 renewable diesel has actually created a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to impede the nascent market.

Neste in a statement slashed the expected 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 below the $600-$800 seen in February.

The company now also expects renewables-based sales in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually forecasted considering that 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 between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste said.

“Renewable items’ list prices have been adversely impacted by a significant decline in (the) diesel cost throughout the 3rd quarter,” Neste stated in a declaration.

“At the very same time, waste and residue feedstock costs have not reduced and sustainable product market price premiums have remained weak,” the company included.

Industry executives and experts have actually said quickly broadening Chinese biodiesel manufacturers are looking for 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 guidance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable influence on biodiesel margins from a lower diesel cost was to be anticipated, Inderes analyst Petri Gostowski said.

Neste’s share cost had actually reversed some losses by 1037 GMT but 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)