Company makes 3rd 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 3rd time this year due to falling costs and also reduced its anticipated sales volumes, sending out the business’s share rate down 10%.

Neste said a drop in the price of routine diesel had actually 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 eco-friendly diesel has actually created a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent market.

Neste in a declaration slashed the expected average similar 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 volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had forecasted 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 expected to sell in between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen formerly, Neste said.

“Renewable products’ sales costs have actually been negatively affected by a considerable reduction in (the) diesel cost during the 3rd quarter,” Neste stated in a statement.

“At the same time, waste and residue feedstock costs have actually not reduced and renewable product market value premiums have remained weak,” the business included.

Industry executives and analysts have stated quickly broadening Chinese biodiesel producers are looking for new outlets in Asia for their exports, while Shell and BP have actually revealed they are pausing growth plans in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable came as a surprise, the negative effect on biodiesel margins from a lower diesel rate was to be anticipated, Inderes analyst Petri Gostowski said.

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