CHINA DATA: Independents go slow on crude buying in Feb

Singapore — Imports of crude and bitumen blend by China's independent refiners dropped 17.4% at 3.93 million b/d in February from six-month highs seen in January as importers slowed purchases ahead of upcoming maintenance schedules -- a trend that is expected to continue for the next few months.

Shandong province -- home to the country's biggest independent refiners -- will witness relatively fewer ship arrivals from late March onward and throughout the second quarter on plans by refiners to take their crude distillation units offline one after another, sources said.

With independent refiners reducing their crude procurements from March, oil products output from the sector would likely remain subdued.

About 2.2 million mt/year of refining capacity will be offline in March at Kelida Petrochemical in eastern Shandong province. Three more will join in April, and two more in May, with another five planning to be shut in Q2, although exact schedules have not been fixed yet, according to local energy information provider JLC.

There is still some uncertainty on the maintenance plans. ChemChina's 5 million mt/year Zhenghe Petrochemical, which had planned to shut for maintenance from late March, will likely postpone the maintenance until May because of improving refining margins.

The refining margins for cracking imported crudes increased to the positive territory of around Yuan90/mt ($12/mt) by end-February, compared with negative margins in January.

"Those independent refineries are quite flexible about their maintenance plan," said an analyst with JLC.

"Whenever there is profit they will operate, and shut when there is none," another trader added.

March imports to slide

Crude cargo arrivals into Shandong ports for March will also be lower from February levels due to the planned maintenance works, according to port sources.

A source with Qingdao port said expected arrivals in March would be no more than 5 million mt compared with around 5.5 million mt in February.

"Actually, half of the arrivals in February have to be postponed into March for discharge due to weather conditions. But new cargo arrivals in March are less, meaning that the total discharges will be lower," said the source.

Port sources from Yantai and Rizhao also echoed the view.

Analysts added that strong appetite from Hengli Petrochemical (Dalian) Refinery and Zhejiang Petroleum & Chemical would help keep total imports in March around 15 million mt.

Feb imports up 37.5% on year

Total imports in February were 37.5% higher from last February, taking total imports over the January-February period up 30.4% from a year earlier.

Total imports by only Shandong independent refineries dropped about 19.3% month on month at 10.5 million mt in February from 13 million mt in January.

Hengli Petrochemical also received relatively lower volumes in February at 2.26 million mt, down about 16.6% from 2.71 million mt in January. Crude imports by ZPC were broadly unchanged at 1.97 million mt last month.

Hengli and ZPC accounted for about 28% of total crude imports by the sector in February, moving up from an average of 24.7% in 2020.

The appetite for feedstock will increase further from mid-2021 when Shenghong Petrochemical starts to procure crude after the startup of its 16 million mt/year refining facility, sources said.

S&P Global Platts collects information covering crude and bitumen blend imported by independent refineries in Shandong province, Tianjin, Zhoushan and Dalian, including 38 crude import quota holders and non-quota holders.

The barrels include those imported directly by the refiners, as well as cargoes bought by trading companies on behalf of the independent refiners that were discharged into tanks.

The 38 refiners have been awarded a combined 104.68 million mt in crude quotas in the first batch, accounting for 88.3% of the county's total allocations for the independent refining sector to date.

Crude imports for independent refiners:

(unit: '000 mt)

^Independent refineries refer to those in eastern Shandong province: Jiangsu Xinhai Petrochemical, Xinhai Chemical in Hebei, Fengli Petrochemical in central Henan, Hengli Petrochemical (Dalian) Refinery in northeastern Liaoning province and Zhejiang Petroleum and Chemical in eastern Zhejiang province. Imports by trading companies were also for the independent refineries in the region.

Source: S&P Global Platts data, company sources