Chinese independent refiner Chambroad has exported its first bitumen cargo from Hainan province's free-trade port under a zero-tariff policy for raw materials and crude oil processing, in a step towards more competitively priced bitumen exports.
The zero-tariff policy allows refiners to process and export bitumen without paying value added tax (VAT) on crude imports, thereby lowering production costs. The zero-tariff policy applies only to feedstocks used to export bitumen. Feedstocks used to produce bitumen for the domestic market and to produce other products will be subject to VAT and other duties.
The first cargo was loaded on the 5,255dwt Leo Asphalt II at Hainan's Yangpu port on 20 June and was discharged in Haiphong, Vietnam on 23 June, data from oil analytics firm Vortexa show.
Lower production costs from VAT-free crude feedstocks under the policy will likely lead to price reductions in seaborne bitumen offers from Chambroad's 2mn t/yr Hainan plant in the future, market participants said.
But it is unclear when the refiner will ease export prices, they added, as supply allocation depends on domestic and export market fundamentals.
Profit margins from domestic sales are better than for exports as seaborne values are lower than domestic prices, a source close to the refiner told Argus.
The zero-tariff policy is expected to reduce the differences in profit margins between domestic and export sales, providing the refiner with greater leeway to allocate more of its production for exports in the future. But the zero-tariff policy is currently under trial implementation, another source close to the company said, indicating that it may not be applicable for all the companies exporting from Hainan in the near term.
Seaborne prices of south China cargoes have recently risen following firming upstream crude and high-sulphur fuel oil values, also trailing gains in fob Singapore ABX 1 values, despite overall sluggish demand in southeast Asia.
Offer levels and selling indications for export cargoes were at around $410-430/t fob south China last week, market participants told Argus. This was up from $405-420/t fob south China during the week ending 13 June.
