China may seek more naphtha imports amid domestic shortage

06 December 2013 07:44 Source:ICIS News

SINGAPORE (ICIS)--China may seek more spot naphtha imports owing to a domestic supply shortage, as its local refineries slashed operating rates in response to a recent pipeline blast, traders said on Friday.

With the world’s second-biggest economy after the US stepping up its purchase, open-spec naphtha prices in Asia are likely to remain firm, they said.

China typically imports 300,000-350,000 tonnes of naphtha each month, the traders said. However, the volumes may climb up to 450,000 tonnes given the recent spate of events, they said.

“They need to import more [naphtha],” said one trader.

Major Chinese refiner Sinopec may have to operate three refineries at reduced rates for months because of crude shortfall after the permanent shutdown of a portion of the Dongying-Huangdao oil pipeline at Qingdao in Shandong province.

The company initially cut the run rates at five of its refineries, including two in Qingdao, following an explosion at the pipeline on 22 November that killed 62 people.

The two Qingdao-based refineries – a 100,000 bbl/day unit and a 200,000 bbl/day unit – will resume normal crude runs later this month as crude can be delivered to these units from other pipelines, market sources said.

The three other refineries – Sinopec Qilu’s 280,000 bbl/day unit, Sinopec Luoyang’s 160,000 bbl/day unit and Sinopec Jinan’s 160,000 bbl/day unit – that primarily process piped imported crude, however, are likely to see crude throughput falling by 20-30% from normal levels. Normal production at the three refineries was 474,000 bbl/day, which is 79% of actual capacity, industry sources said.

Sinopec is currently planning to transmit crude to the Luoyang refinery via a second pipeline between Dongying and Huangdao, with reconstruction of this older pipeline expected to be completed around 10 December.

Meanwhile, China’s BASF-YPC (BYC) cut the operating rates at its 740,000 tonne/year cracker at Nanjing in Jiangsu province on lack of feedstock naphtha to 90% from 100% previously.

($1 = €0.73)

By Felicia Loo