Chinese Refiners Ramp Up Chemical Feedstocks Amid Covid-19

This article first appeared on the BNEF mobile app and the Bloomberg Terminal.

  • Naphtha and LPG supply sharply higher year-on-year
  • Gasoline supply returned to growth in July

The supply of petrochemical feedstocks in China has proven resilient throughout the Covid-19 demand shock.

Refinery output of petrochemical feedstocks, such as naphtha and LPG, increased 8% year-on-year in 1H 2020. This compares to an 11% year-on-year decline in total output for gasoline, diesel and jet fuel.

Naphtha and LPG output has been boosted by increased demand for them in downstream chemical products. There has been a marked increased in consumption of single-use plastics and packaging since the start of the pandemic. Chemical and polymer producers have ramped up run rates in response to healthy margins.

The recovery in fuels demand has been in sharp contrast. Gasoline output returned to year-on-year growth only in July, while jet fuel output is still down 25% year-on-year. Diesel demand has recovered relatively more quickly as industrial activity rebounded.

We expect integrated fuels and petrochemical refiners, such as Hengli and Zhejiang Petrochemical, to have weathered the 2020 shock better than standalone refiners.

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