China ‘teapot’ refiners halt vegetation as new gas tax bites, sources say

By Chen Aizhu and Trixie Yap

SINGAPORE (Reuters) – A number of impartial oil refineries in jap China have halted operations, or plan to take action, for indefinite upkeep durations as new Chinese language tariff and tax insurance policies plunge them deeper into losses, refinery and commerce sources mentioned.

The uncommon outages come at a time of nascent consolidation on this planet’s second-largest oil refining business as an earlier-than-expected peak in Chinese language gas demand and Beijing’s drive to wring out inefficiency begins to squeeze out the weakest of the small impartial vegetation, generally known as teapots.

At the very least 4 vegetation with a mixed annual processing capability of roughly 18 million metric tons, or 320,000 barrels per day, both closed crude oil distillation items (CDUs) this month or plan to in February after Beijing lower rebates on consumption tax paid for feedstock imports, the sources mentioned.

The vegetation, all located within the refining hub of Shandong province, embody services operated by Shandong Shangneng Group, Kelida Petrochemical, Wonfull Petrochemical and China Abroad Power Expertise (Shandong), in line with sources conversant in the scenario.

Not one of the corporations have government-granted crude import quotas, limiting their feedstock choices and making them much less aggressive than rivals. As an alternative, they course of straight-run gas oil, a semi-refined product, or a tar-like heavy residue known as bitumen mix, into transportation fuels or asphalt.

At first of 2025, China raised import tariffs for gas oil and enforced adjustments to tax rebates.

“Below the brand new coverage, it is very onerous for vegetation to maintain manufacturing,” mentioned one supervisor, declining to be named as a result of firm coverage.

His plant, which had been working at 20% capability since November after working at a loss for 18 months, has no date to renew operations, the supervisor added.

The opposite vegetation operated at about 50% capability on common earlier than the coverage adjustments, one business supply estimated.

Not one of the 4 responded to requests for remark.

Below the brand new tax regime, refiners obtain rebates at roughly 50%-80% of the 1,218 yuan ($167.18) per metric ton consumption tax paid for feedstock imports, in contrast with full rebates beforehand.

That successfully raised feedstock prices by $33-$83 per ton, or $5, to $12.8 per barrel, inflicting losses of 300 to 600 yuan per ton, as estimated by three business buying and selling managers.

The stoppages are dampening demand for straight-run gas oil, resulting in decrease premiums of Russia’s straight-run gas oil mix M100, which merchants final pegged at round $50 per ton over benchmark Singapore 380-cst quotes on delivered foundation, down greater than $10 from December.

Costs for bitumen mix, largely sourced from Venezuela and trans-shipped close to Malaysia, nevertheless, have held comparatively secure at benchmark ICE Brent oil minus $7 per barrel for March arrivals into Shandong, supported by enquires from vegetation with crude quota however cautious of more and more expensive Iranian or Russian oil as a result of tighter U.S. sanctions, a number of merchants mentioned.

(1 ton = 6.5 barrels for gas oil, bitumen mix conversion)

($1 = 7.2857 Chinese language yuan renminbi)