Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables organization 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 business for the 3rd time this year due to falling prices and also decreased its anticipated sales volumes, sending the company's share rate 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 expenses for waste and residue feedstock remained high.

A rush by U.S. fuel makers to recalibrate their plants to diesel has developed a supply excess of low-emissions biofuels, hammering revenue margins for refiners and threatening to impede the nascent market.

Neste in a statement slashed the expected typical equivalent sales margin of its renewables unit to in between $360-$480 per tonne of biofuel, down from $480-$580 per tonne seen in July and well below the $600-$800 seen in February.

The business now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually predicted because the start of the year, it included.

A part of the volume cut came from the production of sustainable air travel fuel, of which it is now expected to offer between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen previously, Neste said.

"Renewable items' sales rates have been adversely affected by a substantial reduction in (the) diesel cost during the third quarter," Neste said in a statement.

"At the very same time, waste and residue feedstock prices have actually not reduced and sustainable product market value premiums have actually remained weak," the business added.

Industry executives and analysts have stated rapidly broadening Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually announced they are pausing growth plans 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 cost was to be anticipated, Inderes expert Petri Gostowski said.

Neste's share rate 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)