According to Reuters, the lack of supply will mean that China will not be capable of helping relieve a regional shortage of very low sulphur fuel oil (VLSFO). Currently, demand for the cleaner fuel has increased with the start of the 2020 sulphur cap.


Now, Chinese refiners must adapt their production plans and feedstock crudes, along with installing the necessary infrastructure to boost their VLSFO output. This process could take more than three months, according to an official at a Sinopec refinery.

As of today, China  imports the majority of its marine fuels from regional suppliers including Singapore and South Korea. However, Sinopec and China National Petroleum Corp (CNPC) have pledged to produce about 14 million tonnes per year of VLSFO, with other Chinese refiners adding at least 4 million tonnes.

Nevertheless, the Chinese tax changes would not help fill Asia’s supply gap, as China is limiting wholesale VLSFO exports. Namely, China has approved a long-awaited tax waiver on exports of cleaner ship fuel, helping refiners to boost output. Yet, Beijing may initially limit shipments with the aim to focus on growing its coastal marine fuel market.