Espoo, Finland-based oil refiner and marketer Neste expects continued volatility in the renewable fuel, feedstock and oil markets during the upcoming year, however, the producer of renewable diesel anticipates increased renewable product sales volumes during Q1 2019, outpacing Q4 2018 performance without any major changes in sales allocation.
Announced Wednesday morning in its fourth quarter 2018 earnings report, Neste reported an operating profit of $281mn for its renewable products segment during the quarter, a 23% rise from the previous quarter, while a near 35% rise from the prior year. Full-year 2018 operating profits totaled $983mn, a 75% rise from FY 2017 due to the retroactive US Blender’s Tax Credit, which provided a positive impact of $140mn during the first quarter.
Sales volumes during the quarter totaled 575,000 tons, while full-year figures totaled 2.26mn tons, a 19% and 12% fall, respectfully, from YoY figures largely due to scheduled maintenance at the Rotterdam and Singapore refineries. During Q4 2018 approximately 73% of sales volume went to the European market while the remaining 27% was shipped to North America, mirroring Q4 2017 sales volume distributions.
Production of Neste My Renewable Diesel totaled 566,000 tons and 2.4mn tons during Q4 2018 and FY 2018, a 12% and 8% fall, respectfully, from the prior year. Utilization rates during these periods totaled just 80% and 84%, a 17-percentage point (p.p.) and 14p.p. fall, each, from Q4 2017 and FY 2017 figures.
The company noted suppressed D4 RIN prices as a result of the US-China trade war, which resulted in China’s implementation of a 25% import tariff on US soybeans, triggering a downward trend in soybean oil (SBO) price by mid-year.
“The D4 RINs price peaked in February at 84 cents/gallon before turning on a continuous downtrend through October. That was impacted by the gradual decline in SBO price, and the negative impact of the biofuel mandate waivers granted to small refineries,” the company said, adding that D4 RIN prices began to rebound just before the years end due to fledging crude oil and oil product prices.
Neste also noted the ever-increasing California Low Carbon Fuel Standard (LCFS) price, which the company said reflects the difficulty of fulfilling the increasingly stringent greenhouse gas (GHG) reduction targets in the state. According to PRIMA data, LCFS prices averaged $191.29 and $168.30 during Q4 2018 and FY 2018, an 87% and 89% rise, respectfully, from Q4 2017 and FY 2017 figures.
Neste operates three renewable diesel production facilities in Porvoo, Rotterdam, and Singapore, with an annual production capacity of 2.6mn tons.