MOSCOW (MRC) -- Huang Haidong misses the flush times in 2010 when his refinery in eastern China couldn't produce diesel fast enough to fill the trucks lined up outside, as per Hydrocarbonprocessing.

 

"There was a fuel shortage," said Huang, who works as a supply manager at one of 40 "teapot" or small, privately-held plants that dot Shandong province. "We ran our units at more than 80% at that time and still couldn't meet demand. But things changed after the expansion frenzy."

 

Huang's plant cut processing rates by half over the past four years as China's refining capacity expanded 33% and economic growth slowed in the world's second-largest oil consumer. While the country can process about 13.4 million bpd of crude, the International Energy Agency in Paris estimates demand this year will be just 10.3 million.

 

Oil's 46% plunge since June has benefited Chinese consumers with the lowest gasoline prices since 2010, yet provided little solace for refiners. The added refining has led to losses at privately-owned plants for the first time since 2008, according to ICIS-C1 Energy, a Shanghai-based consultant.

 

Profits at state-owned refineries, including those operated by China Petroleum & Chemical Corp., are also shrinking. Moody's Corp. expects demand growth to slow to between 3% and 5% next year from as much as 10% in 2010 to 2012.

 

China, which trails only the US in fuel consumption, added about 723,000 bpd of processing over the past four years, ICIS-C1 estimated. With economic growth forecast at 7.4% this year, the slowest rate since 1990, fuel demand is set to decelerate.

 

Capacity will increase to 14 million bpd by the end of 2015, according to China National Petroleum Corp., the country's biggest energy company. That's about 78% of what's currently available in the US, data compiled by Bloomberg show.

 

China will add 500,000 bpd of capacity in 2015 and another 602,000 bpd in 2016, according to ICIS-C1. That's equivalent of adding each year a new refinery the size of ExxonMobil's Baytown plant in Texas, the biggest refining complex in the US.

 

China already is starting to divert an increasing proportion of crude imports into emergency reserves. The nation probably resumed strategic stockpiling in November amid the global oil-price slump, official data show. Brent crude declined to USD58.50/bbl on Dec. 16, the lowest in more than five years. Futures traded at USD60.69 at 11 a.m. London time on the ICE Futures Europe exchange.

 

Refiners are expected to adjust plant expansion schedules to their outlook for fuel consumption, meaning they can delay projects to avert a refining glut, according to Citigroup.

 

In Quanzhou, a southeastern port city, Sinochem Group began operating a refinery in January that's slated to be expanded by a third in three years. The nation's fourth-largest oil company will more than double the facility's 241,000-bpd capacity over 10 years, according to Du Sanwang, a marketing manager at the plant.

 

The companies are seeking to compete with teapot plants, which Shandong-based consultant SCI International estimates sell fuel that's about 20% cheaper than state refiners. Huang's facility, known as Shandong HRND Petrochemical Co., turns fuel oil into mostly naphtha and diesel. It can process 40,000 bpd and produces "very clean" diesel that meets the China-V emission standard, he said.

 

As MRC wrote before, China ended in September 2014 its anti-dumping duties on styrene-butadiene-rubber (SBR) imports from Russia, Japan, and South Korea, effective Monday, September 8, the Ministry of Commerce said over the weekend. In 2009, China extended its 4-38% anti-dumping duties on SBR imported from the countries by five years.