CHINA DATA: Independent refineries' feedstock imports tumble to 34-month low in May

China's independent refining sector's feedstock imports in May tumbled to a 34-month low as the prolonged lockdown in major cities capped crude buying. Inflows could improve in June as COVID-19 restrictions gradually ease with cheap Russian deliveries rising, industry sources said June 6.

The private refining sector's overall feedstock imports, including crude oil, bitumen blend and fuel oil, fell 30.7% year on year to 10.88 million mt in May, marking the lowest monthly shipments since August 2019, latest S&P Global Commodity Insights data showed. The imports also fell 1.4% from the 26-month low in April.

Faltering domestic fuel consumption amid the resurgence in infections led to high oil products inventories, dampening the independent refineries' feedstock buying for May deliveries.

Hence, most of the small-sized independent refineries in Shandong and the integrated Zhejiang Petroleum & Chemical have cut their crude imports further in May, market sources said.

The ports in Shandong and Tianjin received 4.1% less feedstocks in May compared with April shipments for the private refineries in Shandong, while arrivals to Zhoushan Port dropped 40% month on month for ZPC, S&P Global data showed.

Independent refineries in Shandong, however, raised their average run rate to 56% in May from 53.4% in April, which might draw down their feedstock inventory when imports fell, market sources said.

The 40 million mt/year ZPC imported 1.34 million mt crude oil in May, slumping 45% year on year when its utilization edged down one percentage point to 79%.

"The margin for petrochemicals products remains negative, while sales of oil products are also slow despite refining margin improvement in the second half of May," a company source said.

The narrower decline in May throughput was supported as the refiner's crude imports in the first four months remained 12% higher than a year ago at 12.47 million mt to feed its four 10 million mt/year CDUs.

Crude imports by the 20 million mt/year Hengli Petrochemical (Dalian) rebounded 63.3% to 1.36 million mt in May from a 35-month low of 830,000 mt in April. With the arrivals, Hengli lifted its throughput to around 85% in May from 70% in April.

Crude imports up

Among the feedstocks, the private refining sector's crude oil intake gained 4% month on month to 10.33 million mt in May, suggesting they prefer the consumption tax-free crude oil rather than bitumen blend or fuel oil when refining margins are narrow.

Looking forward in June, crude imports are likely to recover further with more cheap Russian crude arrivals. Demand also is set to rise as the government rolls out economic stimulus measures while most of the COVID-19 movement controls are relaxed.

Independent refineries are more confident to buy Russian crudes, which are at least $8/b cheaper than their alternatives, helping to boost refining margins, trading sources said.

Meanwhile, bitumen blend arrivals are also likely to rise following a continuous decline in the previous month to meet asphalt demand from more construction works, the trading sources added.

Bitumen blend imports fell another 53.7% from April to 449,000 mt in May, following a 48% month-on-month reduction in April, S&P Global data showed.

Fuel oil imports also fell 27.9% month on month to 95,000 mt in May.

Both fuel oil and bitumen blend attract Yuan 1,218/mt ($183.13/mt) consumption tax.

China private refiners' feedstock imports:

(Unit: '000 mt)

*Total figures for Jan-May include the imports for other independent refineries.

Source: S&P Global Commodity Insights