CHINA DATA: Independent refiners' feedstock imports lose recovery momentum in Oct

Combined feedstock imports for China's independent refineries lost steam from a recovery in September, posting a 0.6% month-on-month decline at 13.09 million mt (3.09 million b/d) in October, latest data by S&P Global Platts showed Nov. 4.

The inflows comprising crudes, bitumen blend and fuel oil in September gained 8.1% from the 18-month low of 12.18 million mt in August at 13.16 million mt, Platts data showed.

However, the volume in October slumped 24.4% year on year, leading imports in the first 10 months of the year to fall 9% to 145.77 million mt from the same period in 2020.

Refineries had increased their buying for second-half October and November deliveries on anticipation that the government would allocate the last batch of crude quotas by end-September.

But the allocation was behind schedule and arrived only in mid-October, preventing small refineries in Shandong province to discharge their imports on time, leading to lower imports in October, according to refinery sources.

Combined imports for Shandong-based refineries have fallen 3.9% on the month to 8.64 million mt in October.

"We expect the imports will increase slightly in November or December with new quotas, but demand for January looks weak," a refinery source said. The market has been extremely quiet in the week started Oct. 31, with no crude deals heard done for days for January 2022 delivery cargoes, according to the source.

China allocated 14.89 million mt quotas Oct. 15 to 16 qualified refineries, including the 16 million mt/year greenfield Shenghong Petrochemical. The quotas were at least two weeks behind refiners' expectations. The additional quotas for the Phase 2 project of the 20 million mt/year Zhejiang Petroleum & Chemical came even later Oct. 25, at 12 million mt.

Shenghong the newcomer

The allocation enabled the greenfield integrated Shenghong Petrochemical refinery in eastern Jiangsu province to receive its first two cargoes of ESPO crude in October.

It is set to receive more cargoes in November, including Persian Gulf crudes, ahead of its startup by end-2021.

Meanwhile, its peers Zhejiang Petroleum & Chemical and Hengli Petrochemical (Dalian) Refinery also slightly lifted their imports by 7.1% on the month to 4.12 million mt.

ZPC in late-October separately gained 12 million mt of crude import quotas for 2021, which would enable the complex to import crude through the rest of the year and use up the quotas as much as possible.

The sufficient feedstock will help ZPC start up its fourth crude distillation unit in November and boost utilization rates in the other three CDUs.

Quotas for Nov-Dec imports

Over the first 10 months of the year, these refineries have imported around 145.77 million mt of feedstock, according to Platts data.

This leaves about 27.6 million mt of quotas available for imports in November-December, deducting those of bitumen blend and fuel oil that do not require a crude import quota.

Platts collects information covering feedstocks imported by independent refineries in Shandong province, Tianjin, Zhoushan and Dalian, Lianyungang, including 37 crude import quota holders, and other non-quota holders.

These 37 refiners have been awarded a combined 158.38 million mt of crude quotas so far till early-November, accounting for 86% of the total allocations to the independent refining sector in 2021.

Expected Nov arrivals mixed

The expected cargo arrivals for November seem to be lower than usual levels, with only around 2 million mt to 3 million mt recorded so far, a port source with Qingdao said.

"This is about 1 million mt below the normal," said the source.

But Yantai expects the discharges in November to be slightly higher at 1.6 million mt, considering the current cargo reports. In October, crude discharges into Yantai Port were at 1 million mt, down 46.8% on the month from September's 1.9 million mt.

While at the Rizhao Port, the discharges of Dongming's crude cargoes have been quite slow over the past two months, due mainly to the limited storage tanks available. The refinery has managed to discharge some of its cargoes that incur a higher demurrage, but still has six cargoes totaling 1.3 million mt undischarged, including two that arrived in August.

Qingdao, Dongjiakou, Yantai and Rizhao are major ports in Shandong capable of receiving VLCC cargoes.

Crude imports for independent refiners:

* State-run firms trading for independent refineries

** Including imports for unspecified receivers

Source: S&P Global Platts data, company sources