CHINA DATA: Independent refiners' 2020 crude imports jump 42% to record high

Singapore — Crude and bitumen blend import for China's independent refineries jumped 42.2% on the year to a record high of 188.11 million mt in 2020, latest data collected by S&P Global Platts showed Jan. 6.

The private refining sector's annual crude import growth in 2020 outpaced the 25% increase in 2019, and 13.9% rise in 2018.

The sharp increase was mainly attributed to low oil prices during the first half of 2020. Independent refineries had actively purchased feedstock cargoes when prices were hovering between $20/b and $30/b.

The refineries' aggressive bargain-buying approach during the period was one of the primary reasons behind the longstanding port congestion in eastern Shandong over May-September 2020, according to market sources.

The total imports in 2020 was also 4.9% higher than the sector's import quota ceiling of 179.4 million mt.

The fact that the refineries ended up buying more than the official government import quotas allocated to them for 2020 explains the reason behind their severe shortage of quotas towards the year-end.

As a result, the sector's December imports fell to an eight-month low of 13.442 million mt, or 3.2 million b/d, Platts data showed.

Top importers in 2020

Hengli Petrochemical (Dalian) Refinery and Zhejiang Petroleum & Chemical were the private sector's top two importers in 2020.

The two new greenfield refineries imported 25.36 million mt and 21.73 million mt, respectively, last year, more than the 20 million mt/year of import quotas allocated to each companies in 2020.

Among the independent refineries based in Shandong, the home of the country's small sized private sector refineries, ChemChina, Dongming Petrochemical, Hongrun Petrochemical were top three importers in 2020.

Meanwhile, Qirun Petrochemical imported 18.5% more crudes than it did in 2019 at 6.65 million mt, which is much higher than its refining capacity of 2.2 million mt/year. The refinery not only imports crudes for its plants with its own quotas, but also trades and resells to its peers in Shandong.

Meanwhile, Taifeng Hairun were also among the top 10 importers last year -- the only trading firm in the major buyer list bringing about 4.38 million mt of crudes -- up 71.8% on the year.

January imports, new quotas

According to a port source in Qingdao, about 1 million mt of crudes which arrived prior to mid-December were still floating in waters as buyers of the feedstock were waiting for the release of new import quotas to discharge the cargoes in both Qingdao and Dongjiakou ports.

Taking into account the cargoes floating in waters since December, the total expected discharges into Qingdao port could be around 5 million mt in January, up from about 4.2 million mt in December, according to the source.

In December, total imports into Qingdao were down by about 15.7% month on month as refiners had to wait until the new import quota allocations to discharge the cargoes.

"Some cargoes had to be discharged into bonded tanks first, before being able to utilize the new quotas after Jan. 1," said the source.

In late-December, China's Ministry of Commerce issued 118.52 million mt of crude import quotas to 43 qualified independent and non-major state-owned refineries in the first batch for 2021, up 19% from the same 2020 batch, which enables refineries to bring their cargoes from Jan. 1 onward.

Looking into January, industry and market sources said the total imports will likely rise from the December level, as there are about 6 million mt of undischarged cargoes waiting in the port regions.

"January imports could easily return to the 15 million mt/month level," said a Beijing-based analyst.

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 the independent refining sector in three batches.

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

* includes imports by other companies

Source: S&P Global Platts data, company sources