China's new Yulong Petrochemical refinery in Shandong province has begun selling gasoline and blendstocks like mixed xylene as well as gasoil in the domestic spot market, local sources told S&P Global Commodity Insights Oct. 16.
After four years of construction, Yulong Petrochemical began trial operations at one of its 200,000 b/d crude distillation units and related secondary units on Sept. 25, and is expected to be fully operational by the end of the year. Phase one includes two CDUs with a capacity of 200,000 b/d each, as well as ethylene and mixed xylene units.
This month has seen the first volumes of gasoline -- reportedly around 35,000 mt -- offered to the domestic market via trucks, a Chinese source said.
The refiner -- which has not so far been allocated any export quotas -- offered 92 RON gasoline meeting National VI standards at Yuan 7,100/mt ($117.21/b) on Oct. 17, down Yuan 50/mt from Oct. 16, said two market sources in Shandong.
Sources within the company declined to comment when Commodity Insights reached out on Oct. 16 and 17.
The price was below the average offer price among its independent refinery peers in Shandong of Yuan 7,220/mt for the same grade, but above the lowest offer of Yuan 7,050/mt by Huaxing Petrochemical, according to market sources.
Still, the sale of gasoline is unlikely to significantly impact domestic supply for now as the Yulong refinery is likely just testing gasoline production ahead of the petrochemicals unit becoming fully operational, at which point it will have more components for gasoline blending, trade sources said.
Meanwhile, in chemicals production, Yulong will sell nearly 20,000 mt of MX in October, a Chinese market source said Oct. 16. Earlier in the month, another Chinese trader estimated the October sales volume to be as high as 30,000-50,000 mt.
The company has two reformers with a production capacity of about 2.6 million mt/year each, sources close to the company said.
According to a market observer, Yulong has a "huge" MX capacity, estimating total volumes close to 3 million mt/year, although this could not be confirmed directly with the company.
China's domestic isomer-MX prices fell through most of August and September and reached a year-to-date low of Yuan 5,806.67/mt on Sept. 23 -- close to the date when Yulong began trial operations of its CDU.
Platts, part of Commodity Insights, last assessed the East China domestic price at Yuan 5,788.33/mt on Oct. 16, or about $695.70/mt on an import-parity basis.
The FOB Korea isomer-MX price was last assessed at $724/mt Oct. 16, down $1.50/mt on the day, Commodity Insights data showed. The FOB Korea price reached a near three-year low of $691.50/mt on Sept. 11.
Yulong continued offering gasoil to the market on Oct. 17, at Yuan 6,490/mt ($122.63/b) for zero pour barrels and Yuan 6,600/mt for minus 35 pour, respectively, according to the two market sources in Shandong.
Its zero pour gasoil offer was the lowest in Shandong, where the average offer in the independent sector was at Yuan 6,605/mt, they added.
The Yulong project is being developed by Shandong's provincial government, with privately held Nanshan Group owning 51%, state-owned Shandong Energy holding 46.1% and the remainder held by two local entities.
