CHINA DATA: Independent refineries to cut Nov throughput as feedstock shortage bites

China's independent refineries will have to further cut crude throughput in November as limited availability of crude import quotas created a feedstock supply squeeze, a trend that is likely to continue until new import quotas for 2024 are issued by Beijing, sources and analysts told S&P Global Commodity Insights.

From the beginning of November, the average utilization rate at Shandong's independent refineries fell 1.98 percentage points to 65.5% as of Nov. 1, from a week earlier, mainly due to weak refining margins, according to data from local energy information provider JLC.

"More refineries will need to cut throughput in November in order to maintain operations until the year end, mainly due to weak margins and tight feedstocks," the analyst with JLC said.

Refining margins for cracking imported crude feedstocks fell by a further Yuan 16($1.90)/mt to slip into negative territory at minus Yuan 140($19.10)/mt as of Nov. 1, according to the JLC data.

Utilization rates are expected to fall drastically in the coming weeks as feedstock arrivals in November had slowed, industry sources said.

"Only a few refineries still have limited crude import quotas by which they can book one or two December cargoes. Many refiners have no quotas left now," an analyst in Shandong said.

The private refining complex will be the main takers for those November-December crude cargoes. But overall feedstock imports will fall drastically next month, the analyst added.

October imports

Independent refineries cut their feedstock imports by 1.1% from a month earlier in October, latest data from S&P Global showed. Feedstock imports by the independent sector was around 4.07 million b/d, or 17.21 million mt, in October. But it was still up 8.1% from a year earlier when it was 3.76 million b/d in October 2022.

Feedstock imports included crudes as well as other feedstocks that do not require crude import quotas such as bitumen blend, fuel oil and other heavy oils.

For crudes only, combined imports were up 12.4% month on month to 15.367 million mt in October, which brought the year-to-date crude imports to 151.37 million mt. The combined imports were also up 24.6% from the same period a year earlier at 121.46 million mt.

The cumulative January-October crude imports accounted for about 91.6% of crude import quotas so far allocated until the end of September, according to S&P Global calculations.

Small-sized independent refineries

Small-sized independent refineries, other than the three refining complexes Hengli Petrochemical (Dalian) Refinery, Shenghong Petrochemical and Zhejiang Petroleum & Chemical, will bear the brunt of the shortage in crude import quotas.

Those refineries have already cut their overall feedstock imports by 5.6% month on month to 10.6 million mt in October, S&P Global data showed. For crudes only, those small-sized independent refineries received 8.76 million mt in October, up 8.7% from a month earlier.

"Most independent refineries should be short of feedstocks and will have to cut their run rates to around 50% or even less, as they have used up quite a lot of quotas in the first half," another analyst said.

Combined crude imports for those small-sized independent refineries over January-October was up 15.8% to 89.72 million mt from the same period last year, S&P Global data showed.

Private refining complexes

Apart from the small-sized independent refineries, the private refining complex raised imports by 17.7% from September to bring in a combined 6.6 million mt of feedstock in October.

The higher imports were mainly contributed by Hengli, which raised its feedstock imports by 219.6% from 765,000 mt in September, a seven-month low.

Hengli in October imported 2.445 million mt of feedstocks, mainly crudes and 200,000 mt of fuel oil.

But other than Hengli, the other two refining complexes received slightly lower volume of crude in October compared with a month earlier.

Shenghong received around 1.13 million mt of crudes in total in October, which was down 25.9% from September.

The refinery, which has cut its utilization rate from above 100% in previous months to around 95% in October due to some outages at their facilities, had lower requirements of crude in October, sources said.

Meanwhile, ZPC also received 8.7% lesser crude imports in October at 3.03 million mt.