Chinese Independent Refineries Halt Operations Amid New Tariffs
Several independent oil refineries in eastern China have halted or plan to halt operations indefinitely due to new Chinese tariff and tax policies, according to refinery and trade sources.
Impact on Industry Consolidation
These outages occur amidst industry consolidation as Chinese fuel demand peaks earlier than anticipated and the government aims to eliminate inefficient operations. Smaller, independent "teapot" refineries are facing the brunt of the impact.
Key Affected Plants
Four plants with a combined capacity of 18 million metric tons per year (320,000 barrels per day) have already closed crude oil distillation units or plan to do so in February. These refineries are located in Shandong province and include facilities operated by Shandong Shangneng Group, Kelida Petrochemical, Wonfull Petrochemical, and China Overseas Energy Technology (Shandong).
Feedstock Challenges
These plants lack government-granted crude import quotas, limiting their feedstock options and competitiveness. They primarily process straight-run fuel oil or bitumen blend into transportation fuels or asphalt.
Policy Changes
In 2025, China raised tariffs on fuel oil imports and modified tax rebates. These changes effectively increased feedstock costs by $33-$83 per ton, leading to significant losses for refineries.
Market Impact
The stoppages have dampened demand for straight-run fuel oil, resulting in lower premiums for Russia's M100 blend. However, bitumen blend prices have remained stable due to demand from refineries with crude quotas and concerns over sanctions on Iranian and Russian oil.