China’s Independent Refiners May Need to Pivot on Missing Crude Import Quotas

China's independent refineries may be required to source alternative feedstocks amid growing expectations that the country may not issue additional crude import quotas towards the end of the year, which could boost import demand for fuel oil, bitumen blend and other heavy oils, sources told S&P Commodity Insights.

• Crude import quotas issued so far in 2023 by Beijing for 29 quota holders stood at 165.21mn tons. Independent refineries have already imported a combined 136mn tons of crude in the first nine months of the year, up 25.7% from 108.2 million mt a year earlier, S&P data showed.
• This leaves about 29.21mn tons of crude import quotas for those independent refineries to utilize from October onwards, which could result in a deficit of 9-10mn tons in crude import quotas, sources said.
• "It has been widely talked about that there would not be any extra crude import quota allocations beyond the annual ceiling volumes. So refineries that will be facing quota shortages will need to source alternative feedstocks," said a Beijing-based analyst.
• It is believed that imports of fuel oil, bitumen blend, as well as other heavy oil, which doesn't require crude import quotas, will likely be in demand in the coming months for independent refineries looking to fill the vacuum, sources said.
• In the first nine months of the year, imports of those three grades have increased by 68.4% year on year to 21.9mn tons, S&P Global data showed.
• "But if they cannot source enough feedstock, they will probably need to cut throughput eventually," said one source.