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China data: Shandong independent refiners cut run rates to 52.5% in July

China’s Shandong independent refineries cut run rates to a 19-month low of 52.5% in July, 17 percentage points lower than the record high of 69.5% reached last December, according to a monthly report by local information provider JLC.

The July rate was about three percentage points lower than market expectations of around 55.5% for the month.

The lower run rate in July was mainly attributed to a heavy maintenance period amid narrowing refining margins.

A combined capacity of around 43.7 million mt/year at 13 independent refineries, or about 27% of the surveyed capacity, was offline throughout July, according to JLC.

JLC’s survey covered 43 independent refineries accounting for about 58% of the country’s total independent capacity. JLC is a Beijing-based information provider formerly known as JYD. “The lingering tax burden, as well as the continuous appreciation of the yuan, have been squeezing the refining profit for those independent refineries, discouraging run rates,” one market source said.

For August, a combined capacity of 5.7 million mt/year will be shut by Qirun Petrochemical and Lanqiao Petrochemical for maintenance.

However, 31.7 million mt/year of capacity that went offline in July will restart gradually from August, which will help lift run rates in August to around 59%, according to JLC.

Crude arrivals at ports in Shandong and Tianjin for independent refineries are likely to remain flat in August from July as refineries will probably continue to sit on their inventories for some time.

A survey by Platts of independent refiners showed that around 7.4 million mt of crude oil was expected to be discharged at ports in Tianjin and Shandong provinces — home to the country’s independent refineries — in August, roughly steady from 7.36 million mt in July.

FEEDSTOCK CONSUMPTION AT 11-MONTH LOW

The surveyed 43 refineries consumed a total 7.33 million mt of feedstocks in July, an 11-month low.

Of the total, only 25,000 mt was straight-run fuel oil, which was cracked by Luqing Petrochemical. No bitumen blend was cracked last month.

The rest was crudes, with imported crudes accounting for about 89% of the total, a record high.

Consumption of domestic crudes continued to fall, with offshore and Shengli crudes falling to low levels.

The consumption of Merey crude fell also to a 12-month low of around 510,000 mt in July, down 15% on month, and was likely to continue falling given the production cuts in Venezuela. Independent refineries will have to import other crudes, like Cold Lake from Canada, to replace Merey for producing asphalt.

ESPO crude remained the top feedstock consumed at around 1.3 million mt, up 16.1% on month, followed by Lula crudes at around 1.22 million mt, up 35.6% on month.

Around 150,000 mt of TEN crude was consumed last month, making it the 10th crude most cracked, all by Hongrun Petrochemical.

Despite the fall in feedstock consumption in July, feedstock inventories at the major ports in Shandong were down 13% at 4.71 million mt July 26 from the end of June, JLC data showed.

This came despite a rise in imports in July from June, according to a separate survey by Platts.

Major ports in Shandong refers to Qingdao, Dongjiakou, Longkou, Laizhou, Rizhao, Dongying and Yantai.
Source: Platts

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