China’s Shandong independent refiners lower Dec 2019 run rates to 72%
Combined run rates at China’s independent refineries in eastern Shandong province fell to 72.2% in December 2019, from a record high of 73.9% in November, according to S&P Global Platts calculations based on raw data from JLC.
Nevertheless, the December run rates were the second highest on record, up eight percentage points from 64% a year ago.
The lower run rates could be attributed to the weak refining margins in December, given the high cost of crude following the spike in freight rates since October 2019, industry sources said.
“The refining margins get thinner, and some refineries have cut crude throughputs since second-half December,” an independent refinery source in Rizhao said.
According to JLC’s calculations, the refining margins for cracking a basket of imported crudes fell by Yuan 44 ($6)/mt from November, theoretically.
On the other hand, demand for oil products has also been weak in winter.
Looking into January 2020, the run rates are likely to fall below December 2019 rates as the weakness in demand will persist till the Lunar New Year holidays at end-January, refinery sources said.
JLC’s survey covered 44 independent refineries, with a total capacity of 172.4 million mt/year (3.4 million b/d), which accounts for about 50%-60% of the country’s total independent capacity.
JLC is a Beijing-based information provider, formerly known as JYD.
FEEDSTOCK CONSUMPTION SLIPS 1% FROM RECORD HIGH
Total feedstock consumption at the 44 surveyed refineries dropped 1.14% to 10.35 million mt, from a record high of 10.5 million mt, or 2.56 million b/d, in November 2019 Platts calculations showed.
It was down 4.3% from November 2019 on a barrel per day basis.
Among the top five refineries that cracked the most crudes in December 2019, both Dongming Petrochemical and Jincheng Petrochemical, had reduced their respective crude throughputs by 2.9% and 6.7% from November.
This was mainly due to the local government requiring crude throughputs to be reduced during heavy smog, allowing refiners to restore their throughputs after the weather cleared, industry sources said.
Nevertheless, Dongming was still the top refinery cracking 670,000 mt of crudes last month, followed by Hongrun Petrochemical with 603,000 mt.
Besides Dongming and Jincheng, the remaining three refineries — Hongrun, Luqing Petrochemical and ChemChina’s Changyi Petrochemical — were able to raise crude throughputs slightly.
These top five refineries cracked a combined 2.8 million mt of crudes, about 27% of the total crude consumption by the surveyed refineries.
The remaining 32 operational refineries cracked an average of 235,000 mt of crudes last month.
URALS SEE THE BIGGEST SPIKE AMONG TOP 10 GRADES
In December 2019, a total of 37 grades of imported crudes were cracked by the surveyed refineries, compared with 30 grades in November.
Of the top 10 grades, the consumption of Urals spiked a massive 534.6% to 330,000 mt from November 2019.
All the Urals were cracked by ChemChina’s three refineries. Urals usually compete with Oman crude when independent refineries choose their feedstock.
The consumption of Oman also increased 11.1% month on month to around 850,000 mt in December.
The grade was also cracked by all three of ChemChina’s refineries, in addition to Wonfull Petrochemical, Dongming Petrochemical, and Hongrun Petrochemical.
Consumption of another Middle Eastern crude grade, Basrah, also increased to 540,000 mt in December, up 107.7% from November.
On top of these grades, ESPO and Lula remained the most favored grades by independent refineries in December, with 1.64 million mt, and 1.36 million mt, respectively.
GASOIL STOCKS AT 6-MONTH HIGH
With the demand weak, stocks of gasoil have reached a six-month high of around 600,000 mt in December 2019, according to the JLC data. It was up 17% month on month.
Stocks of gasoline also rose 14% on the month from November to around 370,000 mt in December.
Combined stocks of gasoil and gasoline rose 15.8% from November, despite the 0.5% month on month decline in total output, the data showed.
During the month, the average gasoil price dropped 0.4% month on month to Yuan 6,426 ($918)/mt, while the average price of gasoline climbed 5.2% on the month to Yuan 6,615/mt, according to JLC.
However in January 2020, refineries expect downstream buyers to replenish stocks before the Lunar New Year holidays at end January.