MOSCOW (MRC) -- China is set to release its first-ever quotas to export very low sulfur fuel oil (VLSFO) with total volumes of 10 million tons for this year, reported Reuters with reference to six industry officials with knowledge of the matter.
The quotas, which followed Beijing’s policy in January to offer tax sweeteners to boost local production of the fuel, paves the way for Chinese refiners to almost fully cover the demand from its coastal bonded marine fuel market of 12 million tons annually.
The quotas will be issued to four state-run firms - Sinopec Group, CNPC, China National Offshore Oil Company (CNOOC) and Sinochem Group - as well as private refiner Zhejiang Petrochemical Corp.
Sources requested anonymity as the matter is not public.
China’s Ministry of Commerce did not immediately respond to a request for comment.
China announced in January to waives consumption tax and value-added tax on the fuel, to make Chinese production competitive versus rival supplies from Singapore and South Korea.
Under the allotment, Sinopec is expected to receive 4.29 million tons, CNPC 2.95 million tons, CNOOC 860,000 tons and Sinochem at 900,000 tons, the sources said.
Companies did not immediately respond to requests for comment.
Two sources at ZPC said its refinery, located in China’s top bunker port Zhoushan, will be allotted one million tons, though the refiner is required to export via state-run companies as proxies.
China’s commerce ministry will include VLSFO into its export license management scheme from May 1, it said in a statement on Tuesday.
The government may top up with another 5 million tons quotas in a second allotment later in the year if required, two of the sources said.
The global shipping industry has since start of this year shifted to cleaner, 0.5% or lower sulfur marine fuel, to comply with new emission rules by the International Maritime Organization.
As MRC informed before, China Sinochem Group is expected to start up a new crude processing unit and a petrochemical complex in southeastern China around mid-2020, marking the state firm's first foray into making petrochemicals.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
MRC