New news in the coking industry

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◆Local refineries in Shandong hope to obtain more crude oil; tax reforms have driven up fuel processing costs. Reuters, Beijing, March 18 – China’s tax reforms on refined oil products have led to a surge in raw material costs, prompting local refineries in Shandong province to seek more crude oil, despite their requests having been denied for years. Due to their small scale, local refineries are often referred to as “teapot refineries”; in the past, they grew rapidly by processing fuel oil. Although they hope to process crudes that yield higher profits, this desire has not been **supported**. Starting from January 1 this year, China raised the fuel oil consumption tax by eight times, but crude oil is exempt from taxation. The Guidelines for the Adjustment and Revitalization of Shandong Province’s refining and chemical industry, published on the website of the Shandong Provincial Economic and Trade Commission, state that efforts will be made to **lift the restrictions on local refining companies regarding the processing of imported crude oil, and to grant the province a quota of 10 million tons per year for the import of crude oil through non-state-owned entities. The Shandong Oil Refining and Chemical Industry Association, which drafted these guidelines, stated that under the plan in place for 10 years, local refineries obtained around 1.5 million tons of crude oil per year from large state-owned oil companies. However, last year the amount of crude oil processed reached around 9 million tons, as large oil companies took over some of the local refineries in order to increase the supply of crude oil and boost production. The draft guidance proposes establishing a refined oil distribution network, and allowing independent refineries to sell oil directly to private gas stations, bypassing intermediaries. The Shandong Oil Refining and Chemical Industry Association also suggests integrating local oil refineries into a single group company. The association has 21 local refineries as members, with a total crude oil processing capacity of up to 45 million tons per year. According to this draft guidance, the management rights of 6 out of the 21 refineries have been transferred to Sinochem Group, while those of another 2 have been transferred to CNOOC Corporation. Jiang Daming, governor of Shandong Province, said on March 6 that he hopes to see more local refineries merge with state-owned oil companies in order to obtain greater access to crude oil supplies and sales channels for refined products. ◆45 coking enterprises in Shandong form world’s largest coking company – Reuters, Shanghai, March 19. The Shandong Coking Enterprises Group, formed by a coalition of 45 coking companies from Shandong province, was officially established in Jinan. Roughly speaking, this group will have an annual production capacity of 30 million tons, with annual sales revenue reaching 60 billion yuan, making it the world’s largest coking company. The report cites Wang Qingtao, president of the Shandong Coking Industry Association and chairman of Shandong Coking Enterprises Group, as saying that this move is aimed at integrating resources and working together to address the increasingly fierce market competition as well as the impact of the international financial crisis on the economy. The report states that, according to the plans, Shandong Coking Enterprise Group will, in the next phase, gradually establish a Shandong Coking Group Co., Ltd. linked by ownership interests through methods such as shareholding, restructuring, and mergers – particularly through mutual shareholdings with steel and coal enterprises. While carrying out these mergers and integrations, the group is also actively preparing for the company’s listing on the stock market. Reports indicate that by the end of 2008, Shandong Province had a coke production capacity of 45 million tons, ranking third in the country and making it a major province for coke production in China. However, affected by the financial crisis, the domestic steel and coke markets have weakened, with weak demand and sharp price drops. As a result, coke manufacturers have seen a decline in sales revenue and profitability, putting the industry’s production and operation conditions under significant pressure. Wang Qingtao said that an important task after the establishment of Shandong Coking Enterprises Group was to set up the Shandong Coking Enterprises Group Supply and Marketing Company. It mainly focuses on balancing supply and demand in the regional market, implementing targeted production and supply of products, enhancing the bargaining power with steel companies in the Yangtze River Delta region, and increasing the added value of coking products in Shandong. He also said that efforts would be accelerated to pursue international development, implementing a \"go global\" strategy by partnering with coal companies to establish coking bases overseas or forge long-term cooperative trade relationships.