Register with us today

and in less than 60 seconds continue your access to: Latest news headlines Analytical topics and features Commodities videos, podcast & blogs Sample market prices & data Special reports Subscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.

  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

IF you are a Platts Market Center subscriber, to reset your password go to the�Platts Market Center to reset your password.

In this list

Analysis: Tax burden, weak margins could slow China's Q2 crude imports

Crude Oil

How are Asian crude flows responding to US-China trade war, Iran sanctions?

Crude Oil

Platts Wellscape GIS

Natural Gas | LNG | Oil | Crude Oil | Refined Products | Petrochemicals

Platts Workshop at the S&P Global Platts Energy


Analysis: Thailand excels as most flexible sweet crude buyer in Southeast Asia

Analysis: Tax burden, weak margins could slow China's Q2 crude imports

Crude oil imports by China's independent refiners are likely to fall in April from March levels and the companies' crude intake may remain tepid for the rest of the second quarter as China's new tax reporting system continue to hurt their refining margins.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

The launch of China's stricter tax reporting rules on March 1 has practically shut the loophole for many independent refiners that used to claim crude oil purchases as fuel oil imports in a way to receive tax rebates.

The increased tax costs have resulted in narrower refining margins, prompting various independent refiners to cut run rates and trim their crude procurement volumes.

Latest survey of Chinese independent refiners conducted by S&P Global Platts showed that around 8.44 million mt of crude oil is expected to call at the ports in Tianjin and Shandong in April, about 11.9% lower from an expected arrival of 9.58 million mt in March.

"The tax burdens for independent refineries have increased a lot in March compared with the previous months," a source with a Dongying-based independent refiner in Shandong said, without giving a specific number on the cost, as it varies greatly among refineries.

Under the old tax system, independent refiners could take advantage of a loophole and managed a tax exemption of as high as Yuan 1,218/mt ($192/mt) for their refined products, which they said was produced from fuel oil and not crude oil.

"It's really hard to give exact figures on how much the costs have increased, but it is clear that the real hard time has yet to come," a Beijing-based analyst said.

Apart from rising tax costs, independent companies' refining margins have also been hit by the recent upward trend in international outright crude prices, as well as the weakness in gasoline retail prices in Shandong, according to Beijing-based local information provider JLC.

Independents' theoretical refining margins for cracking Oman crude, calculated by JLC last month, had fallen in March to around Yuan 293/mt ($46.50/mt), after increasing by Yuan 156/mt in February.


Trade sources recently indicated that some independent refiners were offering various light and medium sweet West African crude cargoes that the companies had initially bought for May and June delivery.

Angola's Kissanje, Cabinda and Plutonio were among the grades heard re-offered into the regional spot market this week, in addition to Brazil's Lula and Sapinhoa grades, for arrival over the later part of the second quarter.

"Some refineries which previously plan to import crude for June are hesitant to take cargoes as planned in view of the current market situation," a crude trader based in Shandong said, indicating that the independent sector's overall crude intake in May and June could fall quite significantly from the previous months.

China's independent refiners would normally fix cargoes for June delivery in around mid-April, but "we don't see healthy buying interest yet," he added.


Amid the narrowing refining margins, some independent refineries have opted to shut for maintenance.

The average run rate at 42 independent refineries surveyed by JLC fell to 61.3% as of April 11, from an average of 62.5% in March.

Four refineries with a combined capacity of 16 million mt/year (320,000 b/d) will be shut for maintenance in April. They are: Shengxing Petrochemical, Zhonghai Fine Chemical, Tianhong Chemical and Chambroad Petrochemical.

Last month, around 16 million mt/year of capacity was taken offline for maintenance.

Jincheng Petrochemical is also likely to shut for maintenance in April, although the start date has not been fixed yet.

Those refineries are quite flexible in shutting for maintenance this year, indicating that they are not confident of the market demand ahead, sources said.

"Shutting down for maintenance at this moment is seen as negative news, which may indicate those refineries are not operating well," an analyst in Shandong said.


Adding to this, the possible closure of Huangdao port under Qingdao Port Group around June during the international summit could also encourage some refineries to schedule their seasonal maintenance around the closure time.

Xintai Petrochemical in Zibo for one, plans to shut for a full maintenance during the period.

"The port may be closed for five to six days during the summit, which will probably start from June 9 and will last for three days," a source with Qingdao Port said, adding firm notice has not been received yet.

But this will be much shorter from an initial plan of 20 days, where the Shanghai Cooperation Organization Summit 2018 venue is near the crude berths in Huangdao.

"If it is only shut for less than one week, that won't affect port operations much for crude," the source said.

--Analysis by Daisy Xu,
--Gawoon Philip Vahn,
--Edited by Irene Tang,