China government recently issued additional fuel oil import quotas towards private entities, including independent refineries and traders, by 3 million tonnes, on the basis of 16.2 million tonnes released at the beginning of the year.
Unlike crude oil import quotas where each entity has a specific quota, the 165 entities enjoying fuel oil import quotas follow the principle of "first come, first claim". That is, the qualified private entity applies for the import quotas based on their demand as long as there are quotas left.
Up to now, there are 21 independent refineries in China enjoying the import quotas of both crude oil and fuel oil, whose combined crude oil import quotas exceeded 80 million tonnes/year. Nevertheless, independent refineries without fuel oil import quotas could still obtain imported fuel oil with the help of other qualified refineries.
Source: Mysteel OilChem
In addition, there are also independent refineries, some of which are refineries producing primarily bitumen, having fuel oil import quotas only, and there combined CDU capacity is more than 15 million tonnes/year.
Source: Mysteel OilChem
While imported fuel oil was mainly used as bunker oil in the previous years, the situation was quite different in 2023.
Looking back on the first half, the fuel oil became quite popular as an alternative feedstock of refineries when the imports of bitumen mixtures were restricted due to more stringent customs requirements, in addition to insufficient crude oil import quotas compared with refineries' feedstock demand.
The arrivals of fuel oil at ports in Shandong Province and Tianjin City as feedstock were close to 11 million tonnes over January-November 2023, against merely 1.13 million tonnes in the same period last year.
Source: Mysteel OilChem
Therefore, the fuel oil import quotas for private entities were almost used up as early as in October, which prompted the government to issue additional quotas to answer the independent refineries' rigid demand, per OilChem estimation.
Looking ahead over 2024, it is believed that fuel oil will become an increasingly important alternative feedstock on the backdrop of supply uncertainties of bitumen mixtures induced by US policy, as well as robust demand of domestic independent refineries.
Written by Aggie Hu, huchenying@mysteel.com
Edited by Navy Liu, liuchuanjun@mysteel.com