China's fuel oil imports in August fell to a near five-year low of 1.17 million mt amid continued weak demand from both the bunker market and independent teapot refiners, according to data released late Monday by the General Administration of Customs.
This was an 8.7% decrease year on year and was the lowest level of imports since October 2008. The volumes refer to the fuel oil classified as No. 5-7 by China's customs department.
Demand for bonded bunker fuel remained weak in South China's Huangpu market in August. "We still have inventories left from July and the next cargo is scheduled to come in October," said a source from Sinopec Fuel Oil Guangdong, adding that the company did not import any cargoes in August.
Other sources, from Sinobunker Guangzhou and Chimbusco Guangzhou, also said they hardly imported any fuel oil cargoes in August as it would have been extremely difficult to resell those barrels in the market.
"We only imported a small cargo of around 3,000 mt from Hong Kong in early August, as our monthly sales volume is less than 2,000 mt amid the weak fuel demand from dry bulk cargo carriers," said a source from Sinobunker Guangzhou.
China's imports of fuel oil came from just seven countries in August, compared with well over 10 in any typical month.
Russia, traditionally China's top supplier of fuel oil, slumped to third spot last month, with volumes tumbling by more than 50% both month on month and year on year, to 248,268 mt.
Some Russian straight-run 180 CST fuel oil, known as M100, originally bound for China, was sold to the US and Japan in August due to higher premiums in those regions, said a Chinese M100 trader. The premium for M100 in August was around $100/mt to Mean of Platts Singapore 180 CST high sulfur fuel oil assessments, on a CFR basis, for delivery 15-35 days ahead into the US, and it was $95-96/mt plus MOPS 180 HSFO for delivery into Japan in August, according to the trader. But the premium for the same grade traded around $85/mt to MOPS 180 HSFO, on a CFR basis, for delivery into East China in August, he added.
Singapore fuel oil imports into China more than doubled year on year and were up 71.5% month on month to 432,803 mt in August, the highest volumes since February 2012.
China also imported 249,026 mt of fuel oil from Venezuela in August, although they were 25% lower than in July. TEAPOT REFINERY RUNS FLAT FROM JULY
Imported fuel oil in China is mainly used as feedstock at teapot refineries -- small independently owned plants that typically have less than 5 million mt/year of capacity and limited secondary processing units.
Shandong province in East China has the highest concentration of teapot refineries, with refining capacity totaling about 104 million mt/year (2.09 million b/d), according to Beijing-based energy information provider JYD Commodities Hub.
Refinery run rates in Shandong averaged 39.78% of capacity in August, up only marginally from 39.65% in July, and a 2.78 percentage point increase from August 2012, JYD data showed.
JYD's survey of 35 teapot refineries in Shandong showed they consumed about 3.8 million mt of feedstock, comprising 2.17 million mt of crude oil and 1.6 million mt of imported fuel oil.
It said consumption of M100 fell for the third straight month in August to around 275,000 mt, compared with 290,000 mt in July. JYD also said it expects government data to show a drop in fuel oil imports into Shandong in August compared with July because of ample supply of crude oil and still-high inventories of fuel oil in the market.
The small refineries can crack domestic crude and straight-run fuel oil, but due to the limited availability of these feedstocks, they rely on fuel oil imports. They buy crude from state-owned Sinopec, PetroChina, China National Offshore Oil Corporation as they do not have crude import licenses themselves, topping up their feedstock with straight-run fuel oil, primarily from Russia and Venezuela.
