Brazil overtakes Russia as top supplier to China’s independent refineries in Feb
Surpassing Russia, Brazilian crude oil shipments for China’s independent refineries topped the list in February at 2.17 million mt, S&P Global Platts monthly survey showed.
Total imports from Brazil were just 54,000 mt more than those from Russia, though they were still 5.4% lower from January.
The strong increase was believed to be driven by the demand for Lula crudes, which were relatively cheaper compared to Russian crudes, especially ESPO, a favorite crude among independent refineries.
“Prices of Lula crudes were relatively lower compared to ESPO in December, so many refineries chose to buy Lula crudes,” an independent refinery official in Dongying said.
According to the official, the price for ESPO crude was around $2.5-3/b on a DES Shandong basis against ICE futures in December, while Lula was only around $1.1/b on the same basis, which contributed to the huge arrivals of Lula in February.
Normally independent refineries need to buy Brazilian crudes two months ahead, due to the long haul.
Quality of ESPO and Lula is quite similar in the yields of middle distillates, only ESPO is slightly lighter which yields more naphtha, according to refinery sources.
In February, around 1.98 million mt of Lula crudes have been imported for the sector, up 61.1% month on month. It was just 4,000 mt less from the top grade ESPO last month.
Besides Lula, around 198,000 mt of Iracema and Sapinhoa were also imported from Brazil last month, compared with the remaining around 140,000 mt of Urals from Russia — the only grade besides ESPO.
In February, around nine buyers have imported Lula crudes, while 12 buyers have imported ESPO crudes.
However, total imports over January-February from Russia still topped the suppliers list, with around 4.56 million mt arrived, up 68.3% year on year.
It was just 87,000 mt more than the imports from Brazil, which was the second top supplier in the first two months of this year.
This strong momentum from Brazilian imports is likely to continue in the coming months, according to refinery sources, as ChemChina is likely to cut ESPO crude imports due to the upcoming maintenance at its refineries.
Total imports from Brazil were up 77.4% year on year to 4.47 million mt over January-February, while imports from Colombia were at fifth place to around 897,000 mt over January-February, up 536.2% on year.
Crude imports from the top 10 suppliers totaled 8.39 million mt in February, accounting for about 86% of the combined imports by the sector.
New Canadian Borealis Heavy Blend crude grade was imported by Hongrun Petrochemical last month, co-loaded with AWB grade from the same country.
Those Canadian grades will be mixed with Kuwait crude as feedstock for producing asphalt, as Hongrun is ready to start up its 1.6 million mt/year asphalt unit in March.
The BHB crude has an API of around 21 and sulfur around 3.8%.
In addition to Canadian crudes, the refinery has received the first cargo of 86,000 mt of US Eagle Ford shale crude from South Korean storages, Platts had reported earlier.
The wide spread between Brent and WTI likely made the grade more attractive for the refinery, according to a Beijing-based analyst. US crude exports have risen in recent weeks due to the widening Brent/WTI spread, which reached $10/b in mid-February.
Platts February survey covers barrels imported for 38 refineries via the ports mostly in Shandong province and Tianjin.
These refiners were awarded a total quota of 72.21 million mt in the first batch, accounting for 85.9% of the county’s total crude oil import quota allocation for independent refineries in the same batch.
The barrels include those imported directly by refiners and trading companies, which will be consumed by the independent sector.
Despite fewer imports by independent refineries for the month, feedstocks inventories at major ports of Shandong continued to build up in February. It grew 3.8% on month to 5.81 million mt as of February 28, from the last record high of 5.6 million mt in January, data from local information provider JLC showed.
Among this, the stocks at Dongjiakou ports have increased by 7.3% to 2.66 million mt, or around 45.8% of the total.
Qingdao and Dongjiakou ports have received around 52.5% of the total imports last month, taking 5.12 million mt in February, down 17.6% month on month.
Major ports in Shandong refer to Qingdao, Dongjiakou, Longkou, Laizhou, Rizhao, Dongying and Yantai.
Imports via Rizhao port came in second at around 1.39 million mt, while Yantai port received fewer cargoes at around 1.09 million mt, or down sharply by 42.5% month on month.