China is unlikely to import diesel for domestic use. And that may be true for the rest of the year due to a slowing economy, industry sources say, putting pressure on Asian diesel margins as well as potentially reversing high prices for the fuel in the West.
The drop in imports of diesel, Asia's most widely consumed fuel, is the latest example of slowing industrial activity in China feeding through to demand for resources. Consumption of iron ore, steel and copper have all fallen in recent months.
The main output of Chinese refineries is typically diesel, but China normally starts buying at this time of the year on the spot market to meet peak demand from agriculture and for power generation. This year China is still exporting.
Usually around this time, they will at least be making enquiries to buy diesel and start snapping up volumes, but I'm not seeing that happen now, said a source at a refiner that normally supplies China, who asked not to be identified.
The fact that they're still exporting, even though in small volumes, shows that demand is not quite there.
China's top refiner Sinopec Corp is exporting about 60,000 tonnes of diesel a month, two A sia-based traders said, after it made its first significant export in six months in June.
This is in sharp contrast to last year when Chinese refiners started making enquiries around this time and imported more than 300,000 tonnes of diesel for November and December, one of the biggest purchases of the year for domestic use.
In 2010, Sinopec also imported about 300,000 tonnes of diesel for November and December.
Purchases typically start from late September to October.
China imported 81,996 tonnes of diesel in August, a fall of 67 percent from a year ago, customs data shows. For the first eight months of the year, it imported 732,747 tonnes, down 47 percent from the same period last year
These figures do not fully reflect China's diesel imports since they also include transit barrels shipped to tax-bonded storage, which may not be destined for the Chinese market.
Demand in China is not good at all, so it doesn't look like state-owned companies will be importing much this year, said a source at a company that imports diesel into China.
China earlier this month raised retail prices of diesel by 6.5 percent, further squeezing domestic demand, traders said.
FUEL OIL DEMAND DOWN
Lower Chinese demand is already being felt in the