Company makes third cut to renewables organization outlook this year
Reduces both margin and volume outlook
Weaker diesel market strikes biofuel costs
(Adds expert, background, detail in paragraphs 2-3, 9-11)
By Elviira Luoma and Essi Lehto
HELSINKI, Sept 11 (Reuters) - Finnish refiner Neste on Wednesday cut the margin outlook for its biofuel business for the 3rd time this year due to falling rates and likewise reduced its anticipated sales volumes, sending the business's share rate down 10%.
Neste said a drop in the cost of routine diesel had impacted 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 produced a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to restrain the nascent market.
Neste in a the expected typical 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 below the $600-$800 seen in February.
The business now also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually forecasted since 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 sell between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste said.
"Renewable items' list prices have been adversely affected by a considerable reduction in (the) diesel cost during the third quarter," Neste stated in a declaration.
"At the same time, waste and residue feedstock rates have not decreased and sustainable item market value premiums have stayed weak," the business added.
Industry executives and analysts have said rapidly expanding Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have announced they are pausing expansion strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the negative impact on biodiesel margins from a lower diesel cost was to be expected, Inderes expert Petri Gostowski stated.
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
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Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
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