Refiner Neste warns of weaker biofuel outlook, shares drop
Finnish refiner Neste on Wednesday cut the margin outlook for its biofuel business for the third time this year due to falling prices and also lowered its expected sales volumes, sending the company's share price down 10%.
Neste said a drop in the price 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 renewable diesel has created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to impede the nascent industry.
Neste in a statement slashed the expected average comparable sales margin of its renewables unit to between $360/metric t–$480/metric t of biofuel, down from $480/metric t–$580/metric t seen in July and well below the $600/metric t–$800/metric t seen in February.
The company now also expects renewables-based sales volumes in 2024 to be about 3.9 metric MMt instead of the 4.4 metric MMt it had predicted since 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 between 350,000 tonnes–550,000 tonnes this year, down from between 500,000 tonnes and 700,000 tonnes seen previously, Neste said.
"Renewable products' sales prices have been negatively affected by a substantial decrease in (the) diesel price during the third quarter," Neste said in a statement.
"At the same time, waste and residue feedstock prices have not decreased and renewable product market price premiums have remained weak," the company added.
Industry executives and analysts have said rapidly expanding Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and bp have announced they are pausing expansion plans in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel (SAF) came as a surprise, the negative impact on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski said.
Neste's share price had reversed some losses by 1037 GMT but remained down 5.8% on the day and 48% lower year-to-date.
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