China Fuel Oil Output and Import to Decrease With IMO 2020

SCI99

2020-01-07

2019 China Fuel Oil Output and Import Volume Analysis

From January to November 2019, China’s total fuel oil output was only 21,713kt. During this period, China’s refineries’ crude oil deep processing technology improved, and the yield rate of fuel oil continued dropping. Moreover, from January to September 2019, the operating rates at both state-owned refineries and Shandong independent refineries decreased from 2018, weighting down the overall output of fuel oil. From January to May 2019, China’s refineries experienced intensive turnarounds, and as a consequence, China’s output of fuel stayed at a low level. In June, the fuel oil output increased to the highest level from Q1 to Q3, 2019. From July to August 2019, the overall demand for fuel oil in China revived slowly, and the output dropped to some extent as well. In September 2019, China’s refined oil market entered its peak season, and the operating rates at refineries rose to high levels as well. Therefore, China’s fuel oil output went up. In Q4, 2019, China’s fuel oil output trended up. With the approaching of IMO 2020, China’s fuel oil market gradually became active, and many participants were preparing for the supply of low-sulphur fuel oil. Meanwhile, China’s import volume of fuel oil also increased. In November 2019, China’s output of fuel oil was 2,390kt, up 545kt or 29.54% from 2018.

From January to November 2019, China’s total import volume of fuel oil was 12,821.8kt, and China mainly imported fuel oil from Malaysia, Singapore, UAE, Russia and South Korea. China’s fuel oil import volume from these five countries above accounted for 84.35% of the total. In terms of the destination of the imported fuel oil in China, Zhejiang’s import volume of fuel oil ranked the first place at 8,144kt, and Beijing’s import volume of fuel oil ranked the second place at 2,856kt. Due to the influence of IMO 2020, China will experience a transition period from high-sulphur fuel oil to low-sulphur fuel oil, and SCI reckons that China’s future fuel oil import volume is likely to drop.

With the implementation of IMO 2020, China’s output of fuel oil may decline to some extent. However, with participants’ preparation of low-sulphur fuel oil production and the issuing of fuel oil export tax rebate policy in the future, China’s output of bonded fuel oil will increase. SCI estimates that in 2020, China’s fuel oil capacity will be around 32,500kt/a, and the fuel oil output will be around 22,500kt. Moreover, due to the transition from high-sulphur fuel oil to low-sulphur fuel oil, China’s import volume of fuel oil in 2020 is estimated to be around 11,500kt.

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