MOSCOW (MRC) -- China's small-scale independent refineries are set to witness their sharpest throughput cut in February as the slowdown in the economy was aggravated by the coronavirus outbreak, refining sources and analysts told S&P Global this week.
"Independent refineries, especially those in Shandong, got hit the hardest this time around, with their utilization rates slashed and operations shut down for some," Kang Wu, head of Platts Analytics Asia, said.
Still, there is a large amount of uncertainty regarding the outbreak and its impact on the Chinese economy.
Globally, the number of confirmed cases has risen to 20,647, with 20,471 of those in China, according to the World Health Organization Tuesday. At least 425 deaths have been attributed to the virus inside China, according to China's National Health Commission.
Initial estimates show Chinese crude runs could be about 1-2 million b/d lower for February than originally expected, according to a Platts Analytics report.
"Independent refineries, except the new mega Hengli (Petrochemical (Dalian) and Zhejiang (Petroleum & Chemical), are estimated to cut throughput by total 700,000 b/d in February. Sinopec and PetroChina are likely to cut about 600,000 b/d and 300,000 b/d, respectively, while the rest to cut 200,000 b/d," a Beijing-based analyst said, adding that he expected China's throughput to drop by 1.8-2 million b/d amid tepid demand.
Independent refiners in Shandong province have also reduced their average run rate by around 17 percentage points from mid-January to 48% this week, and were expected to fall further to around 40%, according to local information provider JLC.
The sector, taking about 25% of China's total refining capacity, borne the heaviest brunt versus independent peers like Hengli and ZPC due to their logistic bottle neck such as land locked transportation and limited storage tanks.
In Shandong, home of the small-scale independent refineries, the government has banned trucks registered in other provinces to ship out products, local refiners said.
In comparison, both the newly built Hengli and ZPC are located in the coast with competitive water-tariff and sufficient storage to maintain runs after their startup last year.
The 400,000 b/d Hengli kept its run rate at 108%, a company source said this week and added they will adjust their throughput, if necessary.
Compared to small-scale independent peers, state-owned refiners generally have less throughput cut as they have oil product export quotas to find outlets in overseas.
Moreover, the state-owned PetroChina will shut its 240,000 b/d Guangxi Petrochemical in southern China February 9 for a 50-day overall maintenance.
The country's only scheduled turnaround in China in February helped PetroChina offset its stock pressure.
As a result, most of PetroChina's refineries only cut their throughput by 2,500 b/d-7,600 b/d.
"Our inventory levels are not too high currently and PetroChina has spare tankers elsewhere," a refining source at PetroChina's Daqing Refining said.
Sinopec, the world's biggest refiner, plans to cut 10% throughput of its total capacity of 5.89 million b/d capacity in February, industrial sources with knowledge said.
Reductions vary at different Sinopec refineries, from about 20,000 b/d-50,000 b/d with the bottom line of 60-70% operation rate.
Its 420,000 b/d Jinling Petrochemical did not only plan to cut throughput but also shut its FCC and gasoline hydrotreater this week for three months as gasoline sales dropped about 70% from normal levels, a source with the refinery said.
The company cut throughput by 21%, or 30,330 b/d, to 113,700 b/d from its original plan in the 160,000 b/d Luoyang Petrochemical in Henan Province, a company source said. Henan is the neighboring province to Hubei, where Wuhan is located.
Sinopec's JV 280,000 b/d Fujian Refining and Petrochemical has cut it run rate to 60% from around 70% in January, which is the lowest run it can bear, a refinery source said.
As MRC wrote before, Sinopec Guangzhou Petrochemical, part of China's petrochemical giant - Sinopec, resumed operations at its cracker on December 5, 2019 following a turnaround. The cracker was shut for maintenance on October 12, 2019. Located in the Guangzhou province of China, the cracker has an ethylene production capacity of 260,000 mt/year and propylene production capacity of 150,000 mt/year.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).