Singapore—The average utilization rate of China's independent refineries in the Shandong province stood at around 70.4% in 2020, up by about six percentage points from the 64.2% in 2019, according to S&P Global Platts calculations based on JLC data Jan. 11.
The substantial increase was attributed to the strong rebound after average runs hit a multi-month low of 43.8% in February, when most of the country was under lockdown to prevent the widespread of COVID-19. After which, run rates leaped to a record high 79% in June amid good refining margins due to low crude oil prices. The refiners kept their throughput high in order to digest the heavy arrival of cheap crude.The refineries ended the year with an average operating run rate of 73%, down from 76% in November, as several refineries reduced production as refining margins started to narrow.
In January, 2021, the utilization rate is expected to fall as a few more refineries are likely to shut for maintenance due to narrowing margins, and regardless of the increase in crude arrivals.
The refining margin for cracking imported crude has fallen by Yuan 37 ($5.30)/mt to around Yuan 165 ($23.60)/mt in December, according to the JLC data.
Among others, the 3.5 million mt/year Haiyou Petrochemical is scheduled to shut its entire refinery for an overall maintenance from mid-January.
TOTAL FEEDSTOCK RISES 10% IN 2020In December 2020, total feedstock consumption rose 3% from November to 11.07 million mt as there was an extra day in the calendar month. The volume was also 6.9% higher than a year ago, the JLC data showed
For 2020, total feedstock consumption at all 44 independent refineries increased 10% on the year to 121.8 million mt, from 110.4 million mt in 2019.
Meanwhile, the monthly average consumption at these refineries stood at 10.2 million mt in 2020, up from 9.2 million mt a year ago.
This means the Shandong independent refineries' baseline demand for crude feedstock is around 10 million mt/month, which may also be the case for 2021, sources said.
On the other hand, Platts data showed that around 136.1 million mt of crudes had arrived in Shandong ports in 2020, 22.4% higher on the year.
This indicates that about 14.3 million mt of crudes had likely traded and resold to other independent refineries outside Shandong.
ESPO CONSUMPTIONS FALLS 3%Despite the higher ESPO crude imports in 2020, the volume cracked by Shandong independent refineries have fallen 3.1% year on year to 18.1 million mt, compared with 18.68 million mt in 2019.
Last year, a total 23.3 million mt of ESPO crude was imported by China's independent refineries, up 4.5% on the year, according to Platts data.
But ESPO remained Shandong independent refineries' most favored feedstock in 2020, with Brazil's Lula and Norway's Johan Sverdrup following close behind.
The total consumption of Johan Sverdrup crude increased to 8.48 million mt, from zero a year earlier, while the consumption of Oman crude fell 20.3% year on year to 5.8 million mt in 2020, according to the data.
Local refinery sources attributed this decline to the availability of cheaper West African and North Sea grades, which were favored by Shandong's refineries.
Wonfull Petrochemical, a major importer of the Oman grade prior to 2020, had purchased more Mandji and other grades rather than Oman last year for better margins.
On the other hand, the total consumption of Urals by the surveyed refineries increased 152.6% year on year to around 5.8 million mt in 2020. Urals can be substituted for Oman given their similar qualities, according to refinery sources.
Shandong independent refineries' crude feedstock ('000 mt)
