1 Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
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Company makes third cut to renewables organization 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 company for the third time this year due to falling costs and likewise reduced its expected sales volumes, sending the company's share rate down 10%.

Neste said a drop in the price of routine diesel had actually impacted 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 produce eco-friendly diesel has produced a supply glut of low-emissions biofuels, hammering earnings margins for refiners and threatening to impede the nascent market.

Neste in a statement slashed the expected average equivalent sales margin of its renewables system to in between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well listed 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 anticipated since the start of the year, it included.

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, below between 500,000 and 700,000 tonnes seen previously, Neste stated.

"Renewable items' prices have actually been negatively affected by a significant reduction in (the) diesel cost during the 3rd quarter," Neste said in a declaration.

"At the same time, waste and residue feedstock rates have actually not decreased and renewable product market rate premiums have stayed weak," the business added.

Industry executives and analysts have actually said rapidly expanding 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 impact on biodiesel margins from a lower diesel rate was to be expected, Petri Gostowski said.

Neste's share cost had actually reversed some losses by 1037 GMT but remained down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki