Date
2011.06.29
Starting from Friday, China will cut import duties for diesel and jet kerosene to zero percent and those for gasoline to 1 percent, an apparent move to boost imports of the fuel. The world's No. 2 economy is expected to face a power crunch as power demand usually rises during the summer.
South Korea's IBK Investment & Securities said China's latest move is aimed at ensuring supplies ahead of the peak summer consumption season.
The investment bank predicted that South Korea's oil refinery industry will get a boost from the Chinese demand as diesel prices will spike due to a tight supply.
"China's fuel demand usually peaks during July and August as the government limits electricity supply and accordingly independent power producers increase their output," said Park Young-hoon, an analyst at IBK Investment.
From 2008 through 2010, the July-August demand for diesel rose 11.9 percent on average, compared to the first quarter, the analyst said.
"China's diesel demand grew even in April, up 13.3 percent on-year, which shows that the supply-demand balance has already been very tight," he said.
China's import taxes for gasoline and diesel currently stand at 5 percent and 6 percent, respectively, making imports of the fuels an unprofitable business under capped power prices.
According to China International Capital Corp., imported gasoline prices, including taxes, are up 100 yuan (US$15.5) per ton than domestic wholesale prices, while imported diesel is 300-400 yuan more expensive.
With the lower duties, import costs are expected to be 200-300 yuan below domestic wholesale prices for gasoline, and up to 100 yuan lower for diesel.
In China, power supply has not been able to keep pace with demand stemming from brisk economic activities. Experts say the situation will get worse during this summer when power demand is expected to grow 12 to 14 percent on-year.
Source: Yonhap News (June 29, 2011)