Two plants operated by chemicals giant Sinochem have been declared bankrupt. It’s located within the Shandong province of China, arising from what Tsvetana Paraskova of OilPrice referred to as “slumping refining margins” in the face of tepid fuel demand in the country, putting a good percentage of employees, according to news sources, in a somewhat state of enigma. This is as Nigeria, regarded as “Africa’s Giant”, and world’s first ten in hydrocarbon deposits, battles over corrupt leadership, dilapidated refineries and astronomical hike in the prices of petroleum products.
Zhenghe Group Co and Shandong Huaxing Petrochemical Group Co were declared bankrupt after creditors failed to agree on restructuring plans for the refineries, OilPrice reports Bloomberg as saying.
Adding that the third refinery, (referring to Shandong Changyi Petrochemical Co), operated by Sinochem in the Shandong province, home to China’s independent refiners, is expected to begin meetings with creditors later in the month, the news channel reports Bloomberg as citing another local court statement.
“Most of the processing units at all three plants have been idled for months, due to the plummeting refining margins that have hit the refineries in Shandong especially hard. The three refineries have a combined nameplate capacity to process 300,000 barrels per day (bpd) of crude.
“China has seen weaker-than-expected road fuel demand this year, which has prompted a decline in refining margins, leaving many plants in debt.
“Underwhelming demand this year has lowered oil refining output as independent Chinese refiners are particularly sensitive to low margins and prefer to reduce refinery throughput when margins and demand are weak.”
Refining margins across Asia according to this report fell in the first week of September to their lowest level for this time of year since 2020, which could possibly have led to more curbs on run rates at Asian refiners, including in China.
Analyzing further that in August, Chinese refiners were estimated to have processed around 12.6 million bpd of crude oil, down by nearly 10% compared to July and 17.5% lower compared to August last year, quoting commodities analysts and strategists.
Further analysis showed that oil demand fell below 12.5 million bpd, down by more than 15% year-over-year – to its weakest level since August 2022.
“The numbers also indicate that crude oil inventories in China built at a pace of around 3.2m b/d in August, the largest monthly build in Chinese crude oil inventories going as far back as 2015,” analysts were quoted as saying.
Source: OilPrice