The vacuum created by the shortage of crude import quotas is forcing China’s trading companies and independent refiners to turn to imports of bitumen blend despite the product attracting a hefty consumption tax that threatens to erode importers’ margins.
Traders and refiners in China have continued to import bitumen blend in July despite the feedstock now attracting a new consumption tax of Yuan 1,218/mt ($188.40).
Sources said trading companies have shipped in at least 801,000 mt of bitumen blend, in as many as seven cargoes, into Shandong ports after the consumption tax came into effect June 12, although most of these cargoes are still waiting for buyers in the domestic market.
Two cargoes totaling 270,000 mt have already paid consumption and value-added taxes of around Yuan 280 million ($43.31 million) for each imported cargo, according to sources close to the deals.
On top of the existing 8% import tax, the consumption tax imposed June 12 adds Yuan 1,376.34/mt ($212.89/mt) to the cost of bitumen blend imports.
This adds to the already high level of stocks in China following plentiful volumes imported during the weeks before June 12. Those cargoes did not attract any consumption tax.
“There have been quite a lot of unsold stocks in the storage tanks by trading companies, which were rushed in ahead of the deadline,” said a port source.
China’s independent refineries and trading companies imported about 3.68 million mt of bitumen blend in June, most of which were discharged before the new consumption tax came into effect, customs data showed.
June imports down on month
China’s June bitumen blend imports fell 11.4% month on month from a record high of 4.16 million mt in May, showed data from the General Administration of Customs July 23.
About 80.3% of the total imports, or 2.96 million mt, were imported from Malaysia, although total arrivals from the Southeast Asian country dropped 20.2% from 3.705 million mt in May.
Shandong-based companies, including independent refineries and trading companies registered in the Shandong province, received about 80.3% of China’s total bitumen blend imports in June, the GAC data showed.
Besides Malaysia, the rest were imports from suppliers like Namibia, Sri Lanka, Togo. These countries did not supply any cargoes in May this year nor in June 2020.
Bitumen blend is typically a crude cargo blended off Malaysia waters with heavy grades, such as Venezuelan Merey crude. They are used as feedstock to produce asphalt for paving roads.
Independent refineries, especially those in Shandong province, have been major buyers of bitumen blend as the barrels were consumption tax free prior to June 12 and refiners are not required to use crude import quotas when bringing in the cargoes.
H1 imports soar
Over the first half of the year, China imported 15.574 million mt of bitumen blend, surging 286.8% from a low base of just 4.03 million mt a year earlier.
Shandong independent refineries were still the major buyers of these cargos, taking 76.2% of the total, or 11.87 million mt.
This was followed by Zhejiang companies with 1.54 million mt of imports, or 9.9% of the total volume.
In the same period last year, the import distribution was much more scattered, with Shanghai and Shandong companies accounting for 27.2% and 25.6% of the share, respectively. Companies registered in Guangdong and Zhejiang accounted for 17.5% and 15.9% of total imports, respectively.
Source: Platts