CHINA DATA: Independent refineries' Aug crude imports fall 10% from record high in Jul

Singapore — Crude and bitumen blend imports in August for China's independent refineries fell 9.9% to 17.85 million mt, or 4.22 million b/d, from a record high in July, and the downtrend is expected to continue as private sector refiners grapple with narrowing margins while rapidly running out of import quotas, information collected by S&P Global Platts showed Sept. 3.

The independent refining sector's crude and bitumen imports crossed the 18 million mt mark for three consecutive months over May-July, with the volume peaking at 19.81 million mt or 4.68 million b/d in July, Platts data showed.

About 73% of the month-on-month drop in August was attributed to reduced crude purchases from two integrated refineries, Zhejiang Petroleum & Chemical and Hengli Petrochemical (Dalian), which combined cut their imports by 35.7% to 4 million mt in August from 5.43 million mt in July.

Independent refineries' average refining margins have fallen to breakeven levels, refinery sources said.

As a result, ZPC has cut its daily run rates from around 130% in July to slightly below 120% in August, which also dampened its crude appetite, according to sources with knowledge of the refinery.

Combined imports by small-scale independent refineries in Shandong remained relatively high at 13.23 million mt in August due to swelling queues of tankers waiting weeks to discharge crude cargoes at Chinese ports. Platts import data only reflects the cargoes that successfully discharged.

According to data intelligence provider Kpler, about 50 crude carriers in various sizes from MR to VLCC had been waiting for more than seven days in Shandong waters for discharging on Sept. 3.

The number of vessels in the queue did not fall below that level over late May to August, which will help to sustain the September crude import volume in the region.

DOWNTREND

However, fewer new arrivals could mean that crude imports could drop to about 15 million mt or 3.67 million b/d for the sector in September, refiners and port sources said.

"New arrivals into Qingdao port are estimated at around 2 million-3 million mt this month, much lower than about 4 million mt in previous months," a port official said. Qingdao port is China's top crude port on turnover.

In addition, the eroding availability of crude import quotas has capped independent refiners' import interest, trading sources said.

August imports bring the total volume to 125.2 million mt in the first eight months of 2020 for the independent refineries, up 55.1% from the same period last year.

Assuming all these imports were claimed to customs as crude oil, only about 28.7 million mt, or 7.18 million mt/month, of quota allocation remains for the refiners to cover imports over September-December, well below the average imports of 15.65 million mt/month over January-August.

Most refineries have already have started to worry about imports over November-December, and whether to cut crude throughput or shut for maintenance, refinery sources said.

Platts collects information covering crude and bitumen blend imported for 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 total of 153.9 million mt of import quotas to date this year, accounting for 85.7% of the county's total allocations for independent refineries in three batches.

Crude imports by independent refiners, trading companies ('000 mt)

Source: S&P Global Platts data, company sources