Neste lowers sales margin guidance for renewables

Neste is revising its 2024 sales margin guidance for renewable products downwards due to a weakening market and falling credit prices.

Neste expects its full-year 2024 average comparable sales margin for renewable products to be in the range of $480-$650 per ton, down from the previously projected range of $600-$800 per ton. This revision comes despite the company maintaining its overall guidance for both renewable and oil products.

The company’s outlook has been impacted by a decline in global diesel prices, along with a continued drop in US bioticket and renewable credit prices during Q2. While waste and residue feedstock costs remain stable, these other factors are squeezing margins.

Neste’s challenges stem from a recent supply glut in the US renewable diesel market. Production capacity has quadrupled in just two years, from 791m gallons annually in 2021 to 3bn gallons in 2023.

Combined with biodiesel, total production is expected to reach 6bn gallons by 2025, potentially exceeding current demand driven by regulations.

This market shift is reflected in Neste’s financial results. The company’s first-quarter revenue dipped year-over-year, with renewable product sales also showing a slight decline. Additionally, renewable product EBITDA dropped significantly.

While costs like palm oil have remained stable, declining credit and diesel prices are putting pressure on Neste’s renewable product margins. The company is navigating a changing market environment and will need to adapt its strategies accordingly.