CHINA DATA: Independent refiners lift run rates to 5-month high as margins hold

China's independent refiners in Shandong province lifted their throughput to five-month highs in November, joining their state-run counterparts who are also stepping up efforts to raise run rates to enjoy attractive refining margins.

Data from local information provider JLC showed that feedstock consumption at China's independent refineries in eastern Shandong province edged up 0.6% month on month to 2.4 million b/d in November, a five-month high. It was also the third consecutive monthly rise in throughput.

Average refining margins for cracking imported crudes fell to around Yuan 849/mt, 28.4% lower from a record high of Yuan 1,185/mt in October, according to JLC's calculation.

The margin fall was due to the retreat in prices of gasoil and gasoline. The average price of zero-vapor gasoil eased by 1.75% from October to around Yuan 7,641/mt ($1,201/mt) in November, while the price of 92 RON gasoline fell by 3.15% to Yuan 8,176/mt, sources said.

Despite the decline, margins remain at high levels. "The refining margin remained at quite high levels, judging from the price trend in previous months. This has supported their crude throughput," an analyst with JLC said.

Crude run rates started to ease slightly toward the end of November as government authorities started some checks on tax issues. The investigation process was expected to continue in December, according to a refinery source.

Sources said that Shandong-based refiners could cut their production levels closer to the Winter Olympics in Beijing, which will be held in early February. This would cap their buying interest for future crude cargoes, sources said.

Run rates, port inventories

On a metric-ton basis, Shandong-based independent refineries cracked a combined 9.85 million mt of feedstocks in November. The feedstocks included crude oil, bitumen blend and fuel oil.

It was down from 10.12 million mt in October, which has 31 calendar days.

This could translate to an average run rate of 71.9% against their combined refining capacity in November, marginally higher from 71.5% in October.

JLC's survey covers 43 independent refineries in Shandong, with a combined capacity of 166.7 million mt/year, which accounts for about 18% of China's total refining capacity.

On the other hand, with feedstock stocks depleting at refiners' facilities, they took delivery of more crudes from the ports.

As a result, feedstock inventories at Shandong's major ports fell by 10.2% from the end of October to 6.31 million mt Nov. 25. It was the second monthly decline in port inventories from a record high of 7.7 million mt at the end of September, JLC data showed.

In addition, the integrated Zhejiang Petroleum & Chemical in Zhejiang province raised its throughput to around 2.65 million mt in November from 1.72 million mt in October, and from 1.68 million mt in September, according to JLC.

The refinery has started up all its four 10 million mt/year CDUs following the new allocation of 12 million mt of crude import quotas at the end of October. This would prompt the refiner to maintain relatively high run rates in December in order to consume the feedstocks.

On the other hand, Hengli Petrochemical (Dalian) Refinery in the northeastern Liaoning province kept its crude throughput largely unchanged at around 1.64 million mt in November, compared with 1.65 million mt in October, according to JLC.

Crude choices

Over the first 11 months of the year, Johan Sverdrup has become the second most favored crude among Shandong independent refineries, with ESPO taking the top position.

Consumption of Johan Sverdrup increased by 17.3% year on year to 8.995 million mt in that period, while ESPO consumption was up 3.4% year on year at 16.985 million mt.

However, consumption of Tupi fell by 44.2% year on year to 7.71 million mt, the sharpest fall among the top 10 crudes cracked by Shandong independent refiners.

Consumption of Upper Zakum has registered the highest growth at 331.2% year on year in the 11-month period, rising to 6.08 million mt, from as low as 1.41 million mt in the same period a year earlier.

Crude feedstock of Shandong independent refineries

Unit: '000 mt

Shandong independent refineries' oil product output, sales

Unit: '000 mt

Top 10 imported crudes cracked by Shandong independent refineries

Unit: '000 mt

Source: JLC