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China data: Independent refiners' Mar crude imports hit new record high, up 21% on month

Highlights

Independent refineries in China's eastern Shandong province, Hebei province and Ningxia province had imported in March a total of 10 million mt, or 2.36 million b/d, of crude oil, up 21% from a revised 8.03 million mt in February, a monthly survey by S&P Global Platts showed Friday.

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The February imports were revised up as several cargoes imported in late February which also finished offloading discharges were also included.

The higher import level for the month, was in line with the increasing feedstock demand at refineries, which had raised runs in March.

Operating rates at the 42 independent refineries surveyed byBeijing-based energy information provider JLC rose to 61% of capacity in Marchfrom 56% in February, suggesting that consumption of feedstock also haveincreased.

The cargo count for March comprises parcels that arrived into ports in Shandong and Tianjin and completed discharge operations through the month, as well as a few cargoes that arrived in late-February but only completed offloading in early-March.

Crude cargoes counted for the month include imports by refineries that have import quotas, as well as those that have no quotas but are buying from those with quotas.

The volumes imported by trading companies like PetroChina, Sinochem, Mercuria, Trafigura, Kunyang and Yijia that are dedicated for independent refineries are also included.

A total of 19 independent refineries with quotas on hand in March, including 16 independent refineries in Shandong, Xinhai Petrochemical in Hebeiand Baota Petrochemical in Ningxia, received 7.89 million mt of crude, up 40% from the previous month.

The biggest increase was seen from the imports by Hongrun at 323%. The refiner last month had imported a total of 1.237 million mt of crudes, including a 270,000 mt of Arab light crude, 210,000 mt of Vasconia crude, as well as Djeno, Sapinhoa, Saturno, Clov, Forties and Azeri light, each of 1 million barrels.

Those 19 refineries have imported a total of 18.194 million mt of crudes over January-March, leaving unused quotas for the first batch at 33.806million mt, according to Platts calculations.

QUOTAS SHORTAGE

Several independent refineries in Shandong, however, have recently beensuffering from a quota shortage.

The refiners in this category include Shandong-based Chambroad Petrochemical, Haiyou Petrochemical and Baota Petrochemical in Ningxia province, which had been allocated the lowest proportion against its ceiling volume.

Haiyou in March had failed to take one cargo of Angola crude imported by CNOOC, as it did not have enough quotas left, according to market sources.

Those refineries have already submitted applications for the new round ofquota allocation to provincial department of commerce in the past weeks, but were told the new round was unlikely before the end of June.

The refiners will either need to lower throughputs or buy barrels fromthe domestic spot market if the new allocations are not issued on time, marketsources said.

In addition, some refineries also were buying quotas from those with morequotas left. Therefore, the fee of buying the quotas were also raised toaround Yuan 150/mt in March, from Yuan 120/mt in February.

On the other hand, some traders were also hesitant to take positions in the international crude market, fearing not being able to find buyers with enough quotas on hand.

TOP SUPPLIERS

Russian crudes, including ESPO, Sokol and Sakhalin were the top choices for independent refineries in March at 1.575 million mt, up 45% from February. Meanwhile, Angola crudes also increased 94% to 1.53 million mt in March.

But imports of Venezuelan crudes have shrunk by 23% month on month to 961,000 mt in March, which was in line with the market expectations.

Outputs of heavy crudes have been cut after the OPEC agreement, thus the supply of Venezuelan heavy crudes have become tight, said a trader source. Prices of Venezuelan Merey crudes have increased to the same level ofWTI, up from WTI minus $2 weeks ago. Nevertheless, buyers still need to paythe full cargo value in advance and then wait for weeks for the delivery tocome, according to the trader source.

In combination with the tight supply of Merey crude, strong demand of asphalt in recent weeks also supported the buying appetite of Merey crudes, which has a better yield of asphalt.

Chambroad and Dongming Petrochemical have been the major buyers of Merey crudes in recent months.

Crudes from UK -- Forties, Ekofisk have gained popularity among independent refineries in March, with total imports rising 388% month on monthto 395,000 mt.

MORE CRUDES FROM US

Other than these regular crude grades, independent refineries also havestarted to try out new grades in March, with more cargoes from the US to comein April and May.

Independent refineries usually choose the most economical crude grades among those offered to them.

Looking to April, Wonfull Petrochemical is looking to receive 1 million barrels each of Mars and Thunderhorse cargoes, and Dongming Petrochemical to receive 1 million barrels of SGC crude from the US.

"We bought because they are quite economical," said a source withWonfull.

Wonfull in May will continue to receive 1 million barrels of Mars crude from the US.

--Staff, newsdesk@spglobal.com

--Edited by Arnab Banerjee, arnab.banerjee@spglobal.com