Industry Trend Analysis - Surging Fuel Exports To Pressure Regional Refiners - MAR 2018

BMI View: China ' s refined fuel exports will remain elevated over the coming quarters, as Beijing grants more export quotas to its state-owned refiners. This will crimp refining margins in Singapore, pressuring refiners across the region, including in Singapore, Japan and South Korea over the coming quarters.

China's exports of refined fuels rose to a record 52.2mn tonnes in 2017, an increase of 8.0% y-o-y, as state-owned and independent private refiners maintained elevated runs throughout the year to capture robust demand for fuels both at home and abroad.

Fuel exports appear set to remain elevated over subsequent quarters, as Beijing awards more export quotas to its four state-owned refiners. Sinopec, PetroChina, Sinochem and CNC were awarded a combined 16.24mn tonnes of export quotas for Q1 2018, up 31.0% from 12.4mn tonnes granted in Q117. Independent refiner Hengli Petrochemical could also be issued separate export quotas in the latter half of the year, when its 400,000b/d refinery in Dalian comes online in October, further strengthening fuels exports. The awarding of higher export quotas is positive for the SOEs as export markets provide alternative sales outlets, critical in light of slowing demand growth at home, particularly for gasoline ( see ' Gasoline Growth To Moderate', August 16 2017).

Fuel Exports Rise To Record High
China - Monthly Refined Fuels Exports, mn tonnes (LHS - LHC) & Singapore Refining Margin, USD/bbl (RHS - LHC) & Annual Refined Fuels Exports, mn tonnes (RHC)
Source: National Sources, Bloomberg, BMI

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