CHINA DATA: Independent refineries' feedstock imports tumble to two-year low in April

China's independent refining sector's feedstock imports in April tumbled to the lowest level in more than two years, as the prolonged lockdown in major cities capped fuel demand and output, though crude imports could improve slightly in May should COVID restrictions ease, while some refiners were keen to buy Russian cargoes at steep discounts, industry sources said over May 6-10.

The private refining sector's overall feedstock imports, including crude oil, bitumen blend and fuel oil, fell 26% year on year to 11 million mt in April, marking the lowest monthly shipments since February 2020, latest S&P Global Commodity Insights data showed. The imports were also down 21.5% from March.

Faltering domestic fuel consumption amid the resurgence in COVID-19 cases and a lockdown in mega city Shanghai, in conjunction with surging crude prices, have dampened feedstock requirements and imports for independent refineries.

As a result, not only small-sized independent refineries in Shandong, but also new refining complexes, have all slashed their crude imports in April, refinery officials and market sources told S&P Global.

Shandong-based private refineries have received 15.5% less feedstocks in April compared with March shipments, while Hengli Petrochemical (Dalian) Refinery and Zhejiang Petroleum & Chemical, cut their imports more by 34.2%, month on month.

Among the feedstocks, the private refining sector's crude oil intake fell 21.3% year on year and down 18.1% month on month to just 9.93 million mt last month, the lowest level since April 2019.

Bitumen blend imports fell 57.6% year on year and down 48% month on month to just 971,000 mt, indicating the weak asphalt demand for paving roads and tepid roads construction and maintenance activities. Stocks of bitumen blend in the ports also remained at a high level, industry sources said.

Most of the bitumen blend shipments to date in 2022 were imported by Shandong independent refineries, as they resort to alternative feedstocks to crude oil after having received just 58 million mt in crude import quotas in the first batch of import permit allocation for 2022, which is down 8% from the first batch of quota allocation last year.

New mega refineries

Total crude imports by new integrated mega refineries Hengli and ZPC in April, were down 34.2% from March, at 2.97 million mt, marking a 16-month low.

April crude imports by Hengli dropped 53.1% from March, to around 830,000 mt, the lowest since May 2019 when it started to preparing feedstock procurement for the startup at the refinery three years ago.

Hengli initially planned to shut some of its key units for maintenance in April, but then was postponed to June or July, according to market sources, which to some extent also had impacted its crude throughputs.

ZPC on the other hand, also cut crude throughputs due to the weak margins for petrochemicals and was operating at around 80% of its capacity with one CDU shut in April.

ZPC has received around 2.1 million mt of crudes in eight cargoes, slightly lower from around 12-14 VLCC cargoes in the previous months.

The greenfield Shenghong Petrochemical complex will feed crudes into the newly built 16 million mt/year crude distillation unit in the coming weeks, but commercial trial runs are still expected in second half of the year, according to sources. The refinery has not received any crudes so far this year, relying on crudes imported in late 2021 for trial runs.

May imports

Looking into May, the expected cargo arrivals into Shandong ports, could pick up slightly with some of the heavily discounted Russian cargoes attracting buyers, though the overall shipments for the month will likely remain low, according to port sources.

"The overall imports in April has been contracting but things appears to be getting a bit better from early-May," said a source with Yantai port.

While on the other hand, the major destinations Qingdao and Dongjiakou ports, are likely to continue receive limited cargo arrivals.

"The expected arrivals are low judging from the current forecast, but it is likely to change, depending on the Russian cargoes," said the source.

It is expected that at least 15 cargoes of ESPO will likely arrive into Shandong, which will probably sustain the overall imports.

It is reported that independent refineries have scooped up Russian crude barrels at low discounts, including both Urals and ESPO, to be arrived into May and June, according to refinery and trade sources.

S&P Global collects information covering feedstocks imported by independent refineries in Shandong province, Tianjin, Zhoushan, Dalian, and Lianyungang, including 32 crude import quota holders, and other non-quota holders.

These 32 refiners have been awarded a combined 99.7 million mt of crude quotas in 2022, accounting for 93% of the total allocations to the independent refining sector in 2022.

CHINA PRIVATE REFINERS' FEEDSTOCK IMPORTS (Unit: '000 mt)

Source: S&P Global Commodity Insights