China’s war on smog chokes Shandong industries, smokes out fuel kiosks

DONGYING, China (Reuters) – China’s crackdown on pollution is choking output of chemicals, fuels and other materials in Shandong province as plants curb or cut operations amid random environmental checks.

Beijing’s clear-sky efforts are not new, but the frequency and duration of recent inspections in the industrial Shandong heartland is impacting output more extensively as small and mid-sized plants come under the same scrutiny earlier focused on large state-owned facilities.

Some 30 independent oil refineries in Shandong have been shut since mid-July, plus an unspecified number of chemical plants making propylene oxide (PO),PVC and rubber tyres have been closed, according to industry sources and market analysts. Unlicensed fuel kiosks have also been removed.

While some of the plants have resumed operations or are hoping to restart later this month, others are less optimistic.

“We were told to prepare to work half a month and be off the other half, and get half our salaries,” said Zhang Yongqiang, a 25-year-old oil depot worker with a 20,000 barrel-per-day (bpd) teapot plant that has been shut for more than two months.

Shandong holds half of China’s capacity for PO, used to make elastic automobile parts and which requires costly waste water treatment. It also makes nearly half the country’s rubber tyres, which emit hazardous gases during production, said William Chen,chemicals expert at consultancy IHS Markit.

Among the plants that have been shutdown are Shenchi Petrochemical, Hengyuan Petrochemical Group, Fuyu Chemical, and Aoxing Petrochemical.

The exact amount of production lost is unknown. There is no official information on shutdowns, but refinery sources say wholesale gasoline and diesel prices in Shandong rose 5 percent to 8 percent in early September from a month ago, while prices for propylene, an intermediate plastics product, were quoted a third higher than in the same month last year.

PO prices gained 40 percent since early this year, triggering higher imports of the chemical, said IHS’s Chen.

Also, while inspections have mostly hit small fuel blenders and oil refiners of 80,000 bpd or less, their outages are being felt in global markets. Customs data showed China’s August crude oil imports slid to their lowest since January.

Imports of light cycle oil, a refinery by-product similar to diesel, nearly doubled in August to over 500,000 tonnes from earlier this year to fill a diesel supply gap, said two traders…

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