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CHINA DATA: Shandong independent refiners' May crude throughput falls to 14-month low

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Platts Global Alert - Oil

CHINA DATA: Shandong independent refiners' May crude throughput falls to 14-month low

Destaques

Refining margins rise to one-year high

Monthly throughput at 10.5 mil mt in Jan-May

Bitumen blend consumption hits 12-month high

Crude throughputs at China's independent refineries in eastern Shandong province fell 1.3% month on month to 2.38 million b/d -- or 10.05 million mt -- in May, marking a 14-month low amid heavy maintenance despite refining margins having risen, according to data from local energy information provider JLC June 9.

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The previous low was 8.06 million mt in March 2020, when Chinese refineries slashed utilization rates amid the COVID-19 outbreak, according to JLC's monthly survey of 43 independent refineries.

The lower throughputs were mainly attributed to refinery maintenance, with 19.5 million mt/year of refining capacity offline from six refineries. However, most of this will likely have returned before the first half of June, leading to a potential recovery in throughputs in June.

The maintenance capped utilization in the private sector, although average margins for cracking imported crude rose Yuan 169/mt ($26/mt) from April to Yuan 544/mt, the highest since May 2020, JLC data showed.

Responding to the stronger refining margins, two independent refineries -- Haike Ruilin Petrochemical and Lanqiao Petrochemical -- decided to postpone scheduled maintenance to July from June.

China is set to start collecting consumption tax on imported light cycle oil and mixed aromatics -- blending materials for gasoil and gasoline -- from June 12, leading to tighter supplies of the two fuels.

Throughputs set to stay low

Refining sources and analysts predicted this week that throughputs will be unlikely to reach the record high of 2.74 million b/d -- or 11.6 million mt -- registered in March, with Beijing narrowing independent refineries' access to feedstock.

"With the government's recent clampdown on illegal quota trading, as well as the consumption tax on bitumen blend, crude imports by independent refineries will largely be capped under the crude quotas, which means quite a lot of refineries will be short of quotas in the second half of 2021," said one refinery source.

Those refineries will likely have to cut crude throughput toward year-end, when most of them will be running out of quota allocations, with supplies of alternative feedstocks -- such as imported fuel oil and domestic crudes -- unlikely to fully cover the reduction.

Average feedstock consumption was still around 10.5 million mt/month over the first five months of the year, up 3.4% from the average of 10.15 million mt/month last year.

In addition, average feedstock consumption at these refineries increased almost 61% to 10.15 million mt/month in 2020, from 6.54 million mt/month in 2016.

Beijing has allocated 102.68 million mt in crude import quotas to independent refineries for 2021, with about 48 million mt more expected to be issued in a second batch later in the year. S&P Global Platts estimates around 80 million mt of quota will be available for the rest of the year, when access to feedstock bitumen blend imports is effectively blocked.

Bitumen blend

In contrast to the lower general throughput, consumption of bitumen blend hit a 12-month high of 1.05 million mt in May, with a 119% month-on-month increase, according to data from JLC.

Over the first five months of the year, the independent refineries cracked a combined 3.37 million mt of bitumen blend. This compares with imports of 8.86 million mt over the same period, S&P Global Platts data showed.

The deficit was mainly due to the fact that some crudes -- such as Iranian crudes and Venezuela's Merey grade -- were imported as bitumen blend. These barrels were reported as crude in JLC's survey.

Imports of such crude will slump once bitumen blend is subject to consumption tax from June 12, analysts and traders said.

"It is possible for those asphalt producers to continue imports of bitumen blend with consumption tax, but it is unlikely to see such higher volumes of more than 1 million mt/month," said a JLC analyst in Shandong.

About 3 million mt of bitumen blend has been declared to customs ahead of the deadline, which is enough for about two months of consumption, Platts reported.

Shandong independent refineries crude feedstock ('000 mt)

May-21
Apr-21
% Change
May-20
% Change
Merey
0
340
-100.0%
0
N/A
Other imported crudes
7,867
10,080
-22.0%
8,517
-7.6%
Shengli
95
76
25.0%
105
-9.5%
Offshore China
1,035
890
16.3%
1,075
-3.7%
Total
8,997
11,386
-21.0%
9,697
-7.2%
Total ( b/d)
2,127
2,692
-21.0%
2,369
-10.2%

Jan-May 2021
Jan-May 2020
change
Merey
0
980
-100.00%
Other imported crudes
43,851
38,773
13.1%
Shengli
575
490
17.3%
Offshore China
4,681
4,570
2.4%
Total crude
49,107
44,813
9.6%
Total crude (b/d)
2,384
2,161
10.3%

Oil product output, sales ('000 mt)

May-21
Apr-21
% Change
May-20
% Change
Output
7,733
8,663
-10.7%
7,952
-2.8%
Sales
7,734
8,658
-10.7%
7,922
-2.4%
Stocks
921
1,207
-23.7%
922
-0.1%

Jan-May 2021
Jan-May 2020
change
Output
39,668
35,427
12.0%
Sales
39,786
35,186
13.1%

Top 10 imported crudes cracked by Shandong independent refineries ('000 mt)

May-21
Apr-21
% Change
May-20
% Change
ESPO
950
1,170
-18.8%
1,830
-48.1%
Tupi
890
1,010
-11.9%
1,030
-13.6%
Johan Sverdrup
740
770
-3.9%
1,170
-36.8%
Upper Zakum
710
850
-16.5%
160
343.8%
Oman
670
810
-17.3%
650
3.1%
Sokol
390
270
44.4%
40
875.0%
Oguendjo
310
145
113.8%
50
520.0%
Nemina
265
300
-11.7%
480
-44.8%
Hungo
250
100
150.0%
0
N/A
Mostarda
230
230
0.0%
290
-20.7%

Jan-May 2021
Jan-May 2020
% Change
ESPO
6,920
6,276
10.26%
Tupi
4,505
6,722
-33.0%
Johan Sverdrup
3,950
2,330
69.5%
Oman
3,190
3,140
1.6%
Upper Zakum
2,880
340
747.1%
Murban
1,470
900
63.3%
Nemina
1,425
1,220
16.8%
Sokol
1,240
130
853.8%
Castilla
1,140
960
18.8%
Sapinhoa
960
900
6.7%

Source: JLC