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CHINA DATA: Independents' feedstock imports hit six-month high on margins, new quotas

Highlights

Shenghong delays trial runs by a couple of months

Hengli imports 20.24 million mt over Jan-Nov period

December arrivals likely to be slightly higher from November

An upward trend in refining margins and allocation of new quotas helped lift feedstock imports by China's independent refiners to six-month highs in November, latest data by S&P Global Platts showed on Dec. 6., as expectations rise that interest for early 2022 cargo arrivals will remain buoyant.

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Combined feedstock imports for China's independent refineries bucked the negative trend and rose 9.8% month on month from October to 14.37 million mt (3.51 million b/d) in November. Feedstock inflows, comprising of crude oil, bitumen blend and fuel oil, had posted a 0.6% month on month drop to 13.09 million mt in October, Platts data showed.

Refineries have generally increased procurement for cargoes for arrivals in November-December. Quotas allocated in late-October also made it possible for independent refineries to claim their imports.

Higher imports were supported by strong refining margins since October when the supply of gasoil remained tight across the country. In addition, there was no new refinery that went into maintenance in Shandong where small-sized independent refineries are concentrated. This also helped cut feedstock inventories, creating more space for new arrivals.

Combined imports for Shandong-based refineries increased by 8.4% month on month to 9.36 million mt in November, the first month since July 2021, when volumes hit the 9 million mt mark.

"Buying interest for January arrival cargoes has been a bit strong in late-November, after premiums dropped," said an analyst.

However, some trade sources were of the view that feedstock consumption could take a backseat due to constant checks and investigation by local tax authorities in December.

Imports by Shenghong surge

The new greenfield Shenghong Petrochemical refinery continued to receive crude cargoes in November for the startup at its new facilities, in addition to the first cargo that arrived in October.

It received one ESPO cargo and one VLCC cargo comprising of Arab Light, Arab Medium and Arab Heavy from Saudi Arabia, totaling 365,000 mt in November, compared with 100,000 mt in October. However, the refinery will likely postpone its trial runs to January or February due to the slow progress in construction, delaying the start of trial runs by about two months from the original target of December.

Zhejiang Petroleum & Chemical has increased its imports in November after the allocation of the new quotas of 12 million mt for its Phase 2 project of 20 million mt/year.

It received 2.96 million mt of crude last month, up by 22.5% from a month earlier. ZPC has been operating at around 80% of its nameplate capacity of 800,000 b/d in early-December, slightly lower from end-November levels.

Over the first 11 months of the year, ZPC has imported around 24.51 million mt of crude, compared with its quota of 32 million mt to date.

Hengli Petrochemical (Dalian) Refinery, meanwhile, has received 20.24 million mt of crude over January-November, against its ceiling quota of 20 million mt for 2021.

Higher December arrivals

Expected arrivals in December by independent refineries are likely to be slightly higher from November, according to port sources.

"The cargoes expected to arrive will be quite sufficient, as there will also be some cargoes due for arrival at the end of the year and wait for the 2022 import quotas," said a source with Qingdao port.

According to the source, total arrivals in December into Qingdao port, could be slightly higher from the discharged cargoes of 5 million mt in November.

But on the other hand, the source said that independent refineries were a bit cautious about the demand outlook in January prior to the upcoming Winter Olympics to be held in Beijing over Feb. 4-20, 2022.

"Refineries worry that the production will be affected prior to the event, which will affect feedstock imports for the coming year," he added.

Remaining quotas

Over the first 11 months of the year, total feedstock imports by independent refineries amounted to 160 million mt, down 8% compared with the same period a year earlier. Despite the fall, new quotas have been allocated for new refining capacities --- including Shenghong Petrochemical and ZPC's Phase 2 project.

This leaves about 17.73 million mt of quotas available for independent refineries to claim their imports in December. Imports of fuel oil and bitumen blend do not require import quotas.

Platts collects information covering feedstocks imported by independent refineries in Shandong province, Tianjin, Zhoushan and Dalian, Lianyungang, including 37 crude import quota holders, and other non-quota holders.

These 37 refiners have been awarded a combined 158.38 million mt of crude quotas so far till December, accounting for 86% of the total allocations to the independent refining sector in 2021.

The total quotas were 2.9% higher compared with those of 153.9 million mt allocated to 38 independent refineries in 2020.

China independent refiners' crude imports (Unit: '000 mt)

Refinery
21-Nov
21-Oct
Change
YTD
Zhejiang Petrochemical
2,965
2,421
22.50%
24,520
Hengli Petrochemical
1,345
1,698
-20.80%
20,240
ChemChina
1,201
1,173
2.40%
15,163
Lawen Namu
813
236
244.50%
7,010
Sinochem*
665
130
411.50%
2,746
Dongming
660
800
-17.50%
8,311
Xinchi
583
40
1357.50%
3,376
Shangang Guomao
463
338
37.00%
2,130
Xintai
448
200
124.00%
2,365
Haike
397
300
32.30%
2,941
Haokun International
388
0
N/A
533
Shenghong Petrochemical
365
200
`82.50%
565
Hebei Xinhai
330
130
153.80%
3,317
Lijin
300
500
-40.00%
3,115
Xinyue
279
130
114.60%
1,308
Hongrun
274
268
2.20%
3,367
BP
272
138
97.10%
1,284
Hualian
239
235
1.70%
3,673
Kenli
220
100
120.00%
2,606
Jiangsu Xinhai
200
100
100.00%
900
Meijianeng
200
0
N/A
816
Zhongyou Yihai
150
0
N/A
150
Chengda
135
8
-43.30%
1,760
Qirun
135
0
N/A
1,805
Wantong
135
50
170.00%
315
Xinhuajin
133
140
-5.00%
403
Yatong
115
266
-56.80%
2,406
Shenchi
106
93
14.00%
895
Runcheng
105
97
8.20%
1,094
Chambroad
100
213
-53.10%
3,141
Gaida
100
0
N/A
1,075
Jincheng
100
100
0.00%
3,389
PetroChina*
100
0
N/A
3,026
Shengxing
100
200
-50.00%
1,637
Yingyu Energy
60
70
-14.30%
225
Shangneng
56
71
-21.10%
218
Furongkang
55
0
N/A
155
Qingdao Maofa
40
0
N/A
500
Tianhong
37
0
N/A
233
Total
14,369
13,087
9.80%
160,136

*State-run firms trading for independent refineries

Source: S&P Global Platts, Company sources