CHINA DATA: Independent refiners' Feb feedstock imports down 8.9% on month

Feedstock imports by China's independent refineries dropped close to 9% in February from the previous month, a trend that might potentially spillover to March due to some scheduled maintenances and a key government meeting during which refiners normally keep their run rates under check.

Data from S&P Global Commodity Insights showed on March 3 that feedstock imports by China's independent refineries fell 8.9% month on month to 15.18 million mt, or 3.97 million b/d in February. But, on a barrels per day basis, February imports were still slightly higher by 0.8% from that of January as it has only 28 days.

February imports were 15.2% higher year on year, mainly due to the startup of Shenghong Petrochemical, which has started to import crudes regularly since July 2022, the data showed.

In February, out of the total feedstock imports, crude imports amounted to 12.87 million mt, down by 11.75% from a month earlier.

Integrated refining complex Hengli Petrochemical (Dalian) Refinery andsmall-sized independent refineries in eastern Shandong province cut their feedstock imports in February.

Shandong independent refineries imported a combined 9.78 million mt of feedstocks in February, which was down by 7.98% from January, according to S&P Global data.

Crude imports by Hengli fell sharply

Hengli Petrochemical received 555,000 mt of crudes in two VLCC cargoes, which was down 69% from 1.79 million mt imported in January. The refinery might be consuming crudes from inventories, as it had imported a combined 4 million mt of crudes over December 2022-January 2023 period, which were slightly higher from its monthly consumption level of around 1.6 million mt, according to sources.

In addition, Hengli cut its run rates slightly in February, according to market sources.

Zhejiang Petroleum & Chemical, on the other hand, boosted its crude imports by 20% month on month to 3.64 million mt in February, which was the highest monthly imports since it started to import crudes in 2019, market sources said.

Shenghong received about 810,000 mt of crudes in two cargoes in February, compared with 820,000 mt arrived in the previous month. The refinery is starting to operate at close to full capacity, which could further boost its requirement for feedstock imports to around 1.4 million mt/month, according to market sources.

March feedstocks imports might be capped

"Feedstock imports might fall slightly in March amid the start of the refinery maintenance, as well as the upcoming Two Sessions meetings," an analyst in Shandong said.

At least two Shandong-based independent refineries, with a combined capacity of 160,000 b/d, will start scheduled maintenance from early March, while maintenance schedules at other refineries had not been fixed yet, according to the analyst.

But with refining margins hovering at healthy levels, independent refineries might be keen to keep operating and postpone their maintenance schedules. Average refining margins for cracking imported crudes was around $15/b in February, slightly lower from $17/b in January, according to data from S&P Global analytics.

In addition, China's "Two Sessions" meetings -- the National People's Congress and Chinese People's Political Consultative Conference -- will take place March 4. The meeting during the start of the year gives China's top policymakers an opportunity to discuss the country's latest economic and social growth targets. Refineries are normally required to keep stable operations during this period of time.

Fuel oil imports up to a recent high in years

Ten fuel oil cargoes totaling 944,000 mt arrived at the Shandong market in February, up by 85.1% from a month earlier, S&P Global data showed.

It is expected that more fuel oil cargoes will continue to arrive in March, due mainly to the good refining margins in recent weeks.

"Some of the fuel oil cargoes that arrived in February were imported for producing gasoline and gasoil, and some were for cracking into asphalt," a trader said.

In addition, some independent refineries also need to import fuel oil as a feedstock supplement due to a lack of crude import quotas, sources said.

In contrast to rising fuel oil imports, bitumen blend imports dropped by 13% on the month to 1.37 million mt in eight cargoes in February, mainly due to the unstable supply situation from Venezuela, traders said.

Feedstock imports for independent refiners ('000 mt)

*Including imports for unknown recipients

Source: S&P Global Commodity Insights