Profit margins in China’s crude oil refining sector plunged 42% in 2019 from a year earlier, said the China Petroleum and Chemical Industry Federation (CPCIF).
The federation said this is the steepest fall in five years and warned that overcapacity is a growing problem.
Some small- and medium-sized refineries were also likely face financial pressure from a fall in sales and a rise in inventory amid the coronavirus outbreak, said CPCIF, adding that the impact would be mainly felt in the first quarter.
The flu-like epidemic had killed 4,7163 people and infected more than 127,863 globally.
“For the full year and longer term, overcapacity will still be the dominant issue in the industry,” CPCIF vice chairman Fu Xiangsheng said at a press briefing.
Increasing capacity in China and weak domestic demand, fuelled in part by the Sino-US trade war, led to a surge in refined product exports to the rest of Asia in 2019, helping to depress prices across the region, he said.
China boosted its annual crude oil refining capacity by 3.4% in 2019 to 860 million tonnes, equal to 17.2 million barrels per day.
It is expected to add another 27 million tonnes, or about 3.1%, of refining capacity in 2020.
“We have growing concerns over the overcapacity issue,” Fu said. “With the launch of the integrated refining projects, production and sales rose but profits fell.”
The total profit for China’s petroleum and chemical industry was $95.9bn in 2019, down 14.9% from 2018 level, according to CPCIF.
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