Company makes 3rd cut to renewables organization outlook this year
Reduces both margin and volume outlook
Weaker diesel market strikes biofuel costs
(Adds analyst, 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 organization for the 3rd time this year due to falling rates and also reduced its expected sales volumes, sending out the business's share cost down 10%.
Neste stated 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 stayed high.
A rush by U.S. fuel makers to recalibrate their plants to produce eco-friendly diesel has actually developed a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hinder the nascent industry.
Neste in a declaration slashed the anticipated average equivalent 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 actually predicted given that the start of the year, it included.
A part of the volume cut originated from the production of sustainable air travel fuel, of which it is now anticipated 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 actually been negatively affected by a substantial decline in (the) diesel rate during the third quarter," Neste said in a statement.
"At the same time, waste and residue feedstock rates have not reduced and eco-friendly product market cost premiums have remained weak," the company included.
Industry executives and experts have actually said rapidly broadening Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion in Europe.
While the cut in Neste's assistance on sales volumes of sustainable air travel fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel cost was to be anticipated, Inderes analyst Petri Gostowski stated.
Neste's share price 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
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Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
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