CHINA DATA: Shandong refiners' throughput hits 16-month low in July on maintenance, slim margins

Feedstock throughput at China's independent refineries in the eastern Shandong province fell to a 16-month low in July amid maintenance by some key refiners, pulling down runs that were already under pressure due to weak refining margins, limited export quotas and government crackdowns.

The fall contributed to a squeezing of China's overall crude throughput in July from a record high level the month before, a trend that is expected to continue in coming months. S&P Global Platts Analytics expects China's throughput to retreat to around 14.6 million b/d in the third quarter from 14.7 million b/d in Q2.

Local energy information provider JLC on Aug. 16 said feedstock throughput in July was 2.28 million b/d or 9.63 million mt, down 11.5% from 2.57 million b/d in June. It was last lower at 1.9 million b/d in March 2020, during the country's initial coronavirus outbreak.

The drop in July was due mainly to maintenance at refineries including Qingyuan Petrochemical, Lianhe Chemical, Haike Ruilin, Haihua Petrochemical, Lanqiao Petrochemical and Hengyuan Petrochemical that took a combined 24.1 million mt/year of refining capacity offline.

Some refiners also reduced throughput due to weakening profit margins. Refining margins for cracking imported crudes fell by Yuan 61($8.70)/mt to around Yuan 437($62)/mt in July due to fluctuating crude prices in the international market, JLC data showed.

Around 14 of the 43 independent refineries surveyed had cut their July throughput by between four and 21 percentage points from June.

Independent refiners have also been quite pessimistic about the market outlook due to the tight crude import quota availability and ongoing investigations by local authorities related to tax and trading operations, discouraging them from raising throughput levels.

Throughput

Feedstock consumption at the surveyed refineries averaged 10.37 million mt/month over January-July, 2.2% higher than the 10.15 million mt/month averaged in July. Volumes have risen steadily since the independent refiners were granted permission to process imported crudes in early 2015.

Feedstock consumption averaged 6.54 million mt/month in 2016, the first full year the refiners used imported crudes.

Trade sources said total feedstock consumption would likely fall below 10 million mt/month in coming months as throughput was adjusted due to the quota shortage.

In addition, feedstock inventories at major ports in Shandong remained high Aug. 5 at around 6.43 million mt, up 2.7% from end June.

Given the quota shortage and relatively high stocks, independent refineries are likely to continue destocking in coming months, sources said.

Bitumen blend, fuel oil

A total 585,000 mt of bitumen blend was cracked by the surveyed refineries in July, down 32% from 860,000 mt in June, which in turn was down 18% from a 12-month high of 1.05 million mt in May, according to JLC.

Those feedstocks were mainly cracked by independent refineries Chambroad Petrochemical, Haiyou Petrohcemical, Wonfull Petrochemical, Xintai Petrochemical and Kelida Petrochemical.

In addition, there was still ample stocks in tanks at ports, as well as the 270,000 mt of bitumen blend that was declared to customs and discharged in July.

Around 50,000 mt of fuel oil was cracked by Chambroad Petrochemical in July, which was believed to be the first time the company has used that feedstock in years.

Eight cargoes of fuel oil totaling 311,000 mt were discharged at Shandong ports in July, up 135.6% from 132,000 mt in June. Three cargoes totaling 138,000 mt were scheduled to be discharged in August.

"There is still some buying interest for fuel oil," a JLC analyst said.

Despite the higher cost due to a new consumption tax, there could still be demand for bitumen blend given the quota shortage, especially for refiners that have expanded capacities in recent years, market sources said.

SHANDONG INDEPENDENT REFINERIES CRUDE FEEDSTOCK

(Unit: '000 MT)

SHANDONG INDEPENDENT REFINERIES' OIL PRODUCT OUTPUT, SALES

(Unit: '000 MT)

TOP IMPORTED CRUDES CRACKED BY SHANDONG INDEPENDENT REFINERIES

(Unit: '000 MT)

Source: JLC