CHINA DATA: Shandong independent refiners’ Aug throughputs drop to 17-month low

September 10, 2021

Throughputs at China’s independent refineries in eastern Shandong province have continued to fall in August due to maintenance works and cuts earlier in the month amid weak margins, according to S&P Global Platts calculations based on data from JLC.

The combined throughput comprising crude, bitumen blend and fuel oil fell to a 17-month low of 9.45 million mt in August, according to local energy information provider JLC Sept. 9.

This was down 1.8% from 9.63 million mt in July. The last low was registered at 8.06 million mt in March 2020, when China was hit by the initial spread of COVID-19.

Shandong’s independent refineries have ramped up throughputs by around 135% to average 10.5 million mt/month in the first five months of the year, from a low base of 4.47 million mt/month in 2015 when they were first given access to imported crudes.

But the growth has slowed down since July when refineries increased maintenance works on thin margins. Refineries also were reluctant to keep up throughputs amid constant investigations by local authorities on tax and quota trading.

The throughputs have continued to fall in August, despite a marginal increase in margins for cracking imported crudes. The margins increased by Yuan 10/mt ($1.50/mt) to around Yuan 447/mt ($69/mt) last month.

With the maintenance getting to a close, throughput rates are likely to grow slightly in September, which has prompted demand for crudes somewhat, according to JLC.

Inventories remain high
Feedstock inventories at major ports in Shandong remained high as of Aug. 26, at 7.44 million mt, up 4.5% on the month from 7.12 million mt in end-July, due mainly to slower outflows from ports to refinery facilities.

This came despite slightly lower imports by the independent refineries, falling 3% at 8.38 million mt in August compared with 8.61 million mt in July.

Given the generally tight quota condition, independent refineries are likely to sit on stocks while keeping throughputs capped, sources said.

Fuel oil, bitumen blend stay supportive
In August, around 890,000 mt of bitumen blend was cracked by the refineries surveyed by JLC. This was up 52.1% from 585,000 mt in July.

The four refineries that cracked bitumen blend were Chambroad Petrochemical, Haiyou Petrochemical, Wonfull Petrochemical, Xintai Petrochemical and Kelida Petrochemical, same as in July. Jincheng Petrochemical and Dongming Petrochemical also cracked bitumen blend last month.

In addition, four independent refineries cracked around 160,000 mt fuel oil in August, compared with just 50,000 mt by Chambroad Petrochemical in July.

Due to the quota shortage, independent refineries could still take bitumen blend and fuel oil as a supplement feedstock, despite the higher costs of the consumption tax since June.

Haike Petrochemical booked a September fuel oil cargo at a premium of around $70/mt against the Mean of Platts Singapore 380 CST HSFO assessment, market sources said.

JLC’s survey covers 43 Shandong-based independent refineries with a combined capacity of 166.7 million mt/year, which accounts for about 18% of the total refining capacity in China.

ZPC and Hengli
Apart from Shandong independent refineries, independent refiner Hengli Petrochemical (Dalian) Refinery has maintained crude throughputs stable at 1.62 million mt in August, according to JLC.

Zhejiang Petroleum & Chemical has cut its crude throughputs by about 15% to 1.7 million mt in August from around 2.02 million mt in July, after it shut a third 10 million mt/year crude distillation unit in end-July. It currently has two CDUs operational with a 10 million mt/year capacity each.

ZPC also has started to source other feedstocks like fuel oil due to the quota shortage, according to sources.

Shandong independent refineries’ crude consumption: