Company makes 3rd cut to renewables service outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel costs

(Adds expert, background, information 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 service for the third time this year due to falling costs and likewise decreased its expected sales volumes, sending the business's share cost down 10%.

Neste said a drop in the rate of routine 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 produced a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to impede the nascent industry.

Neste in a statement slashed the expected average equivalent sales margin of its renewables unit to between $360-$480 per tonne of biofuel, down from $480-$580 per tonne seen in July and well below the $600-$800 seen in February.

The business now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had forecasted because the start of the year, it added.

A part of the volume cut came from the production of sustainable air travel fuel, of which it is now expected to sell in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste stated.

"Renewable items' prices have actually been adversely affected by a considerable reduction in (the) diesel rate throughout the third quarter," Neste said in a declaration.

"At the same time, waste and residue feedstock rates have actually not reduced and eco-friendly item market value premiums have actually stayed weak," the company added.

Industry executives and experts have stated rapidly broadening Chinese biodiesel are looking for new outlets in Asia for their exports, while Shell and BP have revealed 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 unfavorable influence on biodiesel margins from a lower diesel price was to be expected, Inderes expert Petri Gostowski stated.

Neste's share cost 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; Editing by Terje Solsvik and Jan Harvey)