However, regardless of developments in the taxation laws, these imports look set to come under pressure following refinery expansions/upgrades, due to come into effect over the next two to three years, Gibson Research said in a report.
Chinese refineries are in the midst of adding reformer capacity. This allow refineries to produce higher octane gasoline blending components (such as mixed aromatics) from naphtha.
For example, this year, China plans to add 375,000 barrels per day of reformer capacity, with nearly twice as much in 2018 and even higher in 2019.
These new additions will affect the tanker market in several ways, Gibson said. Providing the new capacity comes on line as planned, demand for reformate imports is likely to decline, which will have a negative impact on product tankers.
Keeping things in perspective, these imports represent a very small percentage of overall product tanker demand. However, this may be mitigated by higher demand for imported naphtha.
Currently, many independent refiners sell naphtha to local petrochemical plants as much of the production is unsuitable for gasoline blending.
Adding reformer capacity will enable refiners to upgrade their naphtha for use within the domestic gasoline pool.
The knock-on effect may be that local petrochemical plants will have to source higher volumes of naphtha from overseas, boosting import demand and to a certain extent, offsetting the decline in mixed aromatics imports.
The crude tanker market may also be positively affected, as lighter crudes tend to yield more naphtha. With Chinese plants increasing their capacity to upgrade low quality naphtha into higher octane components, demand for lighter crudes, such as those sourced from the Atlantic Basin, could be attractive to Chinese refiners who have invested in reformer capacity, Gibson concluded.