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China's July diesel exports rise to record as teapots produce more
[BEIJING] China's diesel, gasoline and kerosene exports surged last month after state-owned refiners shipped excess fuel abroad as they struggled to compete in the domestic market with independent companies that sold at lower prices.
Customs data showed on Monday that diesel exports rose 181.8 per cent to a record 1.53 million tonnes, almost tripling China's average monthly export volume in 2015.
Gasoline shipments were up 145 percent at 970,000 tonnes, falling slightly from a record 1.10 million tonnes in June. Kerosene exports jumped 46 percent to 1.09 million tonnes, the customs data showed.
The surge in fuel exports underscores the inability of China's state-owned refiners to deal with a domestic oversupply of oil products as private refiners, known as teapots, have started undercutting the bigger companies in order to gain customers.
"Independent refiners grabbed a big chunk of Sinopec and PetroChina domestic market share especially with diesel, forcing them to export," Zhu Chunkai, an senior analyst with data specialist Sublime China Information Group.
According to Mr Zhu, teapots are offering diesel at 4,150 yuan to 4,200 yuan per tonne, compared with 4,400 to 4,500 yuan per tonne for state refiners.
Since the Chinese government started last year allowing the teapots to begin importing crude to process into fuels, the plants have raised their output. Data from ICIS China for the week ending Aug 11 showed run rates at independents were 3 per cent higher than the previous year at 44.6 per cent of capacity.
A senior manager from an independent refiner told Reuters their domestic sales remained strong in recent months and they have not cut crude purchases.
Analysts have warned that the domestic fuel oversupply could get worse and persist longer than anticipated as China's slowing economy weighs on oil demand.
Most of China's oil majors pre-plan their crude processing rates and are not able to adjust them according to market demand, exacerbating the oversupply, said Mr Zhu.
The customs data also showed that China, the world's second-largest economy, imported 1.6 million tonnes of liquefied natural gas last month, down 16.4 per cent from a year earlier and increased its purchases of foreign kerosene by 15.2 per cent to 340,000 tonnes.