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China: Domestic low-sulphur bunker fuel production hits record high in May, on fall in imports

15 Jun 2022

The following article published by Manifold Times on 15 June was sourced from China’s domestic market through a local correspondent. An online translation service was used in the production of the current editorial piece:

Imports of low-sulphur fuel oil in China have dropped sharply since April, according to China-based consultancy LongZhong on Saturday (11 June).

An import volume of less than 300,000 metric tonnes (mt) was recorded in April and no arrivals of low-sulphur fuel oil in Chinese ports have been posted for May.

At present, the low-sulphur fuel oil in China’s bonded ship fuel supply market mainly relies on domestic resources for fuel supply.

China: Domestic low-sulphur bunker fuel production hits record high in May, on fall in imports

In order to make up for the shortage of supply caused by the decrease in imports, domestic refineries have increased their low-sulphur fuel oil output.

However, better prices for low-sulphur fuel oil in the domestic Chinese market have resulted in producers favouring inland sales of the material for higher profit margins, than over the bonded bunkering sector.

China: Domestic low-sulphur bunker fuel production hits record high in May, on fall in imports

According to data from Longzhong, the output of low-sulphur fuel oil in Chinese refineries reached 1.322 million mt in May 2022, the highest month-on-month increase since China started low-sulphur fuel oil production in 2020. 

From January to May 2022, China’s low-sulphur fuel oil production increased by 30% year-on-year, while low-sulphur fuel oil consumption fell by about 0.8% year-on-year.

China: Domestic low-sulphur bunker fuel production hits record high in May, on fall in imports

Although the output has reached the highest level in history, due to the scarcity of imports, domestic resources are still in a state of tension. The level of port oil supply orders is limited by resources making it difficult to make a substantial breakthrough. 

From January to May 2022, China’s bonded ship oil supply market showed a slight decline compared with the same period of last year.

At present, the destocking of low-sulphur bonded ships in major ports is obvious. At the same time, the measurement of oil products during the refuelling process of bonded ships is more stringent.

At present, the procurement channels and supply capacity of domestic resources have become limitations for the growth of bonded ship fuel supply companies; especially for most local bunker license players which have no resource supply guarantee, restricting their development. 

In addition, under the imbalance of supply and demand, China loses its price advantage over Singapore, and is also at a disadvantage in the competition in the international market.

It is expected that in June , the output of low-sulphur fuel oil in domestic refineries will still break through, or reach the level of more than 1.4 million mt. 

However, compared with the conventional demand of about 1.5 million tons in the Chinese market, it is still difficult to achieve a complete balance between supply and demand. If there is no obvious supplement of imported resources, the resource shortage will continue.

 

Photo credit: OilChem
Published: 15 June, 2022

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