Page 9 - AsianOil Week 25

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Chinese refiners battle for retail market share
The increasingly level playing eld in China’s downstream has led to heightened midstream competition
COMMENTARY
WHAT:
Wholesale fuel prices have fallen across several eastern provinces.
WHY:
Rising production and slowing demand have led to a price war.
WHAT NEXT:
Older state-owned downstream capacity may be rationalised in the near future.
CHINA’S downstream has evolved dramatically over the last decade. Government-led changes to the sector have allowed private players to compete against their bigger state rivals for market share.
But the success of privately owned re ners has become a double-edged sword, with the country’s expanding downstream capacity and slowing demand for oil products creating a supply glut that has led to bloodletting on the retail fuel market.
JLC International reported on June 18 that wholesale gasoline and diesel prices were fall- ing amid weaker international crude prices and so market fundamentals. e Chinese energy market intelligence provider reported that Pet- roChina and Sinopec’s retail fuel networks had kicked o a price war in several eastern prov- inces in March that had inevitably dragged in private players.
Price dip
According to JLC, prices of 92-RON gasoline in south, east and north China and Shandong slid by 6.45%-9.23% to RMB5,700-5,950 ($829-865) per tonne between May 31 on June 18. Diesel prices in the same regions dropped 3.28%-5.56% to RMB5,800-6,000 per tonne.
JLC reported that retail fuel chains in Shan- dong, Henan, Hebei, Jiangsu, Zhejiang and Guangdong provinces began o ering steep dis- counts on gasoline in March. is was driven by
mounting inventories as local demand failed to mop up increasing production levels.
China’s apparent consumption of gasoline amounted to 42.59 million tonnes in Janu- ary-April, up 3.6% year on year, according to National Bureau of Statistics (NBS) data. Growth was down by 3 percentage points year on year and re ected an ongoing decline in new car sales.
Demand growth has so ened on the back of a years-long slowdown in the wider economy. GDP grew by 6.6% in 2018 – the slowest pace since 1990 – and the International Monetary Fund (IMF) has forecast that it will expand by 6.3% this year.
e e ects are already being felt. e coun- try’s re nery runs shrank 2.8% year on year in May to 51.9m tonnes (12.27m b/d), according to NBS data published on June 14. Slower industrial growth of just 5% for the month has been par- tially blamed for the depressed throughput rates.
To make matters worse, state-run re ners ran out of oil product export quotas in the rst half of May and were unable to continue exporting Chinese fuel to overseas markets.
Pressure valve
Gasoline exports shrank 42.4% year on year in May to 850,000 tonnes and diesel shipments fell by 37.8% to 1.24 million tonnes, according to General Administration of Customs (GAC) data published on June 24.
40 35 30 25 20 15 10
2011 2012
2013 2014 2015
Passenger and commercial vehicles
2019*
China's vehicle sales
™
2016 2017 2018
Source: CAAM *Forecast
Week 25 26•June•2019 w w w . N E W S B A S E . c o m P9
million