China's exports of both low and high sulfur fuel oil fell 6% year on year to total 18.04 million mt in 2022, according to data from the General Administration of Customs Jan. 28, as bunker demand in the downstream market declined.
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Exports rose 5% month on month but fell 5.6% on the year to 1.23 million mt in December 2022, the GAC data showed.
All of the barrels exported in 2022 were classified under the customs warehouse trade route, suggesting that the volumes were sold as bonded bunker fuels at Chinese ports.
The rise in fuel oil exports in December coincided with relatively firm bunker demand as some shipping companies still saw the northern Chinese ports as viable refueling alternatives when adverse weather conditions around the southern ports intermittently disrupted bunkering operations, traders said.
A bearish economic outlook had also subdued freight activity, resulting in fewer container liners plying the US-China routes, according to local bunker suppliers.
Total fuel oil imports fell 10.3% year on year to 12.23 million mt in 2022 while volumes used for bonded bunkering fell 15.5% on the year to total only 7.9 million mt, according to GAC data.
Of the total imports recorded across 2022, volumes classified under the general trade route, which sources said were likely straight-run fuel oil feedstocks for China's domestic refineries, rose 1.34% on the year to 4.33 million mt.
Supplies from the UAE and Russia accounted for 25.6% and 25.4% of China's total fuel oil import in 2022, up from 11.7% and 10.4%, respectively, in 2021.
Total fuel oil imports in December rose to a 16-month high of 1.76 million mt, up 19.8% from November, the GAC data showed.
To promote further growth in the downstream bunker market, Chinese authorities issued 8 million mt of low sulfur fuel oil export quotas in its first allocation since 2023, which was 23.1% larger than the initial batch of quotas the previous year, and almost half of the 16.75 million mt allocated across 2022, S&P Global Commodity Insights reported earlier.
LSFO output surge
China's domestic LSFO production rose 43.5% on the year to total 15.9 million mt in 2022, while output in December fell 0.9% on the month but rose 24.4% year on year to 1.39 million mt, according to local information provider JLC.
The significant jump in refineries' LSFO output also indicated the rising dependence on domestic cargoes for bonded bunker sales at supply ports than on imported shipments as imports were down, traders said.
S&P Global's calculations based on GAC data showed that exports of domestically produced LSFO rose at least 30.9% year on year to 10.14 million mt in 2022.
Compared with December, LSFO production levels in January are expected to be "stable to slightly lower," as operational capacities were likely lower during the Lunar New Year festive season, according to a local bunker supplier.
However, lower bunker demand since the second half of January could still lag inventory builds and pressure LSFO delivered premiums, according to China-based suppliers.
Bonded fuel oil bunker sales at Zhoushan rose 9.1% year on year to total 6.025 million mt across 2022, aligning with China's ambitions to expand the port as Asia's key bunker hub, S&P Global reported earlier citing market sources with knowledge of the matter.
Delivered bonded bunker fuel sales in December fell 0.8% month on month but rose 4.2% on the year to 585,300 mt -- the third-highest volume recorded in 2022 -- despite intermittent adverse weather challenging physical bunker operations, sources added.