Two independent Chinese refiners have started buying feedstock for two bankrupt refineries that they acquired from a state-owned company, Reuters has reported, citing trade sources without naming them.
Qicheng Petrochemical and Qirun Petrochemical, according to the sources, have so far bought a combined 4 million barrels of crude from Brazil and Angola, both for delivery in November.
The two refining facilities were previously the property of state refiner Sinochem Group. However, Sinochem Group closed shop in 2024. Earlier this year, Reuters again reported that the defunct refiner had sold another of its refineries to an independent processor.
Oil refining is among the industries that have been struggling with overcapacity lately. It has led to thinner margins that have sank several refiners, including Sinochem Group, which buckled under its debt and tax pile.
Independent refiners are meanwhile due for a consolidation amid the overcapacity issues. China has the highest oil refining capacity in the world, at over 18.2 million barrels daily as of 2024. By next year, this will have grown to over 21 million barrels daily. This massive capacity, however, is unlikely to survive the next ten years without some trimming, Wood Mackenzie warned earlier this year. The consultancy said it expected 10% of China’s refineries to shut down before the end of 2034.
The Chinese government is already taking steps, reportedly. In August, Bloomberg wrote that Beijing was planning to shut down some smaller refineries and upgrade larger ones to make them competitive. Outdated refineries account for 40% of China’s total processing capacity, the Bloomberg report said.
Meanwhile, refinery rates are rising, at 14.94 million barrels daily last month. Crude oil purchases continue to exceed refining rates, according to import-tracking data, meaning China is still stockpiling crude at elevated rates of an estimated 1 million bpd for August.
Source: By Charles Kennedy from Oilprice.com