Pandemic restrictions slow crude discharging at northeast China port, impacting refiners

Restrictions aimed at containing a COVID-19 outbreak in northeast China have impacted crude discharging and land transportation at Yingkou port, slowing feedstock deliveries to at least one refinery in the area, refinery sources told S&P Global Commodity Insights March 18.

The port in Liaoning province receives VLCCs to serve Norinco's Huajin Chemical refinery and the independent Panjin North Asphalt Fuel and Haoye Chemical refineries. The province has tightened movement restrictions and neighboring Jilin province has imposed lockdowns in a bid to curb a spike in omicron variant infections.

"Port staff are required to do COVID tests and isolate, leaving a shortage of hands to deal with port operations as normal and leading to discharging delays," a local refinery source said.

The vessel queue at Yingkou port was not long due to few arrivals, but some cargoes have been waiting to discharge for longer than usual, the source added.

The Zaliv Amerika carrying 700,773 barrels of ESPO crude has been floating in Yingkou waters since March 4, and the Onrense carrying 1.1 million barrels of crude since March 2, according to data intelligence provider Kpler.

Crude cargoes typically took 1-2 days to be discharged prior to the tightening of COVID-19 controls in the province on March 5.

The 20.5 million mt/year Panjin North Asphalt Fuel refinery was also grappling with land transportation restrictions in receiving its crude barrels from the port via truck, forcing it to minimize crude runs to avert a shutdown, a refinery source said.

Other refineries connected to the port via pipeline were less impacted, sources said.

Less impact in east

COVID controls in eastern China, where most of the country's refining capacity is located, have had less impact on refinery and ports operations as these regions have adopted more targeted controls to minimize the impact on the economy, refiners in Shanghai and in Shandong and Jiangsu provinces told S&P Global.

This was despite Shandong and Shanghai being among the epicenters of the current outbreak.

China's President Xi Jinping has pushed for "swift containment" of the outbreak but at a minimum cost, to reduce the socioeconomic impact as much as possible.

"To ensure stable operations at the port, we're required to move only between home and the workplace," said a source with Shandong Qingdao port, China's top crude port by turnover.

There was no port congestion in Shandong currently amid expectations of low arrivals in March, port sources said.

But domestic demand for transportation has slowed down due to the various movement restrictions, prompting independent refineries to cut throughput.

The average run rate at Shandong independent refineries fell further to around 56% March 16, down one percentage point from a week earlier, according to local energy information provider JLC.

China is forecast to see oil demand destruction of 650,000 b/d in March and 400,000 b/d in April based on the estimated demand loss for each oil product at a provincial level, according to S&P Global Commodity Insights' Platts Analytics.

The current pandemic restrictions could also impact oil product exports in April, market sources said.