Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel rates

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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 organization for the third time this year due to falling rates and likewise lowered its expected sales volumes, sending out the cost down 10%.

Neste said a drop in the rate of routine diesel had actually impacted what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock stayed high.

A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has actually developed a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to restrain the nascent market.

Neste in a statement slashed the expected typical comparable 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 likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had predicted given that the start of the year, it added.

A part of the volume cut originated 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 actually been negatively impacted by a substantial decline in (the) diesel cost throughout the third quarter," Neste stated in a declaration.

"At the exact same time, waste and residue feedstock prices have not decreased and renewable product market rate premiums have stayed weak," the business included.

Industry executives and analysts have actually stated rapidly expanding Chinese biodiesel producers are seeking 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 air travel fuel came as a surprise, the negative influence on biodiesel margins from a lower diesel rate was to be anticipated, Inderes expert Petri Gostowski stated.

Neste's share rate had actually 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