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Fuel oil imports into China decreased by 3 percent month-on-month and by 6 percent year-on-year in June, according to data released by the General Administration of Customs.

Last month China is reported to have imported 2.22 million metric tonnes of fuel oil. The decline was mostly due to lower demand from independent, or 'teapot', refineries as the domestic oil product market was bearish in June, industry sources said.

Furthermore, some cargoes previously scheduled to arrive in June were postponed until July as import tariffs were lowered as from July 1st.

Teapot refineries

Teapot refineries, which are mainly located in Guangdong and in the eastern Shandong province, use fuel oil as feedstock as they have limited access to crude oil. The use of cheaper feedstock enables them to compete with the state-owned refineries when producing products such as gasoline and diesel for the domestic market.

Over the last few years China has raised the import tariff on fuel oil, which in turn has made it more difficult for teapotpot refineries to compete against the state-owned refineries and has also had an impact on demand.