Neste pulls back from renewable chemicals

The Finnish refiner Neste is one of the world’s largest producers of biobased and recycled-plastic-based raw materials, which are used to make renewable chemicals and polymers. In recent years, many prominent chemical companies, eager to make their products more sustainable, have announced agreements to buy this feedstock.

But in a development that casts doubt on consumer demand for such products, Neste has announced that it will streamline its activities in renewable and circular chemicals and focus instead on renewable fuels.

The decision is the result of an analysis Neste launched in October aimed at improving its financial performance. The company is also delaying further investment in its refinery in Porvoo, Finland, except in energy efficiency and renewable hydrogen projects. Overall, the company will eliminate about 600 jobs.

“Our current financial performance is weak and not sustainable,” Neste CEO Heikki Malinen says in a press release announcing the change in direction.

Neste calls the Porvoo facility the world’s largest renewable fuel refinery. It turns inputs such as vegetable oil and waste plastics into renewable diesel, sustainable aviation fuel, and Neste RE, a naphtha-like raw material for plastics and chemical production.

Chemical companies such as Borealis, Braskem, Covestro, Lotte Chemical, and Resonac have signed agreements to buy Neste RE. In October, for example, Braskem said it will make polymers and chemicals out of Neste RE for sale mainly in South America.

But companies have struggled to sell these renewable products when chemicals made from fossil fuels undercut them, according to a white paper published in September by the Renewable Carbon Initiative, part of the nova-Institute think tank. “Weak demand is explained by fossil feedstocks remaining cheaper as their price does not reflect the costs coming from their negative climate externalities,” the paper says.

In contrast, the sustainable fuel market is aided by regulations around the world governing road and air traffic, nova-Institute CEO Michael Carus says in an email. In a presentation delivered at a recent investor event, Neste forecasts that global demand for sustainable aviation fuel will increase from 900,000 metric tons last year to 24 million metric tons in 2035.

Carus argues that the renewable chemical market has good long-term prospects as large brand owners seek to meet internal targets for reducing greenhouse gas emissions. But even though Neste is not withdrawing from the market, the personnel reduction will “probably affect the chemicals business disproportionately,” he says.