- Chinese authorities gave a rebate on the 13pc value-added-tax (VAT) paid on sales of fuel oil into bonded market from February 1.
- Total February fuel oil exports from Singapore and Malaysia to China were well above 1mn t.
- During March-April, fuel oil exports from Singapore and Malaysia to China were estimated at around 550,000-650,000t and 650,000-750,000t respectively.
- Delivered premiums in March slumped below $50/t as Chinese refiners produced LSFO to ease pressure from high inventories of gasoline and diesel.
- The delivered premium stood at $29.02/t on 30 April.
- Sales at Zhoushan port rose to 993,000t during January-March, up by 14pc a year earlier.
China’s decision to issue its first batch of 0.5pc low-sulphur fuel oil (LSFO) bunker export quotas could lower imports of LSFO into the country, reports Argus Media.
Lower LSFO imports
China’s commerce ministry has decided a bunker export quota for its first batch of 0.5pc low-sulphur fuel oil (LSFO). This is expected to lower LSFO imports into the country.
Export volume to China
According to traders, exports of residual bunker fuel oil from Singapore and Malaysia to Chinese bunkering ports is at least 1mn t a month.
It is noticed that export volumes to China have decreased since March.
What is the reason?
Increases domestic LSFO production
Increased production of LSFO bunker fuel from domestic refineries could be the prime reason for reduced cargo movement towards China.
Reason for Increase in production
As Chinese authorities gave a rebate on the 13pc value-added-tax (VAT) paid on sales of fuel oil into bonded market from February 1, the production increased.
This resulted in spurring interest in exports to bonded tanks.
Estimated fuel oil into China
According to traders, total February fuel oil exports from Singapore and Malaysia to China were well above 1mn t.
March and April
According to market sources, during March-April, fuel oil exports from Singapore and Malaysia to China were estimated at around 550,000-650,000t and 650,000-750,000t respectively.
Assessments on a fob basis
Chinese refiners began to ramp up the supply of fuel oil for sale into the bonded bunker market, after the announcement of approved plans to refund tax on fuel oil exports in February.
The increase in production volumes occurred when delivered premiums for the maximum 0.5pc sulphur marine fuel on a fob basis at the Zhoushan port were nearing $100/t to Singapore 0.5pc marine fuel spot assessments on a fob basis.
Curtailed transportation fuel demand
- Delivered premiums in March slumped below $50/t as Chinese refiners produced LSFO to ease pressure from high inventories of gasoline and diesel, as Covid-19 curtailed domestic demand of transportation fuel.
- The delivered premium stood at $29.02/t on 30 April.
Middle and light distillate profit margins
Traders noted that the LSFO production from Chinese refineries to be sold into the bonded market is also very dependent on middle and light distillate profit margins.
The impact of the issuance of fuel oil quotas on the country’s future fuel oil import patterns is still in its early stages.
Production of more distillates
- China’s refining fleet is designed to minimise fuel oil output.
- Firm domestic gasoline and diesel prices in China could prompt refiners to easily switch to produce more distillates.
- This could curtail LSFO production from refiners to be sold into bonded tanks.
- This could keep suppliers at Chinese bunkering ports turning to bunker fuel imports to meet bunker demand in the bonded market.
China’s bonded bunker sales
China’s bonded bunker sales, including LSFO, high-sulphur fuel and marine gasoil, totalled 13.18mn t in 2019 and were largely supplied by imported cargoes from all over the world, mostly from Singapore.
Sales at Zhoushan port rose to 993,000t during January-March, up by 14pc a year earlier.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Argus Media
