Relatively low throughput at fuel oil storage facilities in Huangpu, South China, has led to storage operators earning relatively low rental fees, industry sources said Monday.
     The fee for storing a metric ton of fuel oil in Huangpu is currently around Yuan 25/month ($3.60/month). However, the fee should be higher than Yuan 30/month, for the terminal to run profitably, an official with storage operator BP-GDIH said.
     BP-GDIH, a joint venture between BP (40%) and state-owned Guangzhou
Development Industrial Holding (60%), runs a 360,000 cubic meter storage at
Huangpu, with around 80,000 cubic meters for fuel oil storage.
     Fuel oil storage fees are currently capped by the overcapacity caused
by falling imports, the sources said, adding that there is around 700,000
cubic meters of fuel oil storage in the Huangpu area, but less than 50% of the
capacity is taken up.
     Fuel oil imports into Huangpu have been shrinking since hitting a peak in
2004 at 11.9 million mt. The imports were just 4.9 million mt in 2007.
     The imports were 4.2 million mt over January-September 2008, and the
figure for the whole year is expected to be the same as 2007, according to
customs data.
     Meanwhile, a lot of industrial end-users switched to other fuels in 2007
when import costs started to pick up.
     And though it started to fall after peaking in August, domestic end-users
have curbed imports as the global economic downturn has spread to China's
export sector.
     The slowdown resulted in the closure of nearly 70,000 export-oriented
factories in H1, 2008, most of whom were fuel oil end-users.
     Despite the current tough situation, fuel oil storage operators are
optimistic that demand will pick up as China's economic growth resumes its
fast pace, thanks to the country's recently announced economic stimulus plan.
     China said on November 9 it would loosen credit, cut taxes and embark on
a massive infrastructure spending program in a wide-ranging effort to offset
adverse global economic conditions by boosting domestic demand.
     A stimulus package estimated at Yuan 4 trillion ($586 billion) will take
effect over the next two years to finance programs in major areas, such as
low-income housing, rural infrastructure, water, electricity, transportation,
the environment, technological innovation and reconstruction after several
disasters, most notably the May 12 earthquake in southwestern Sichuan
province.
--Staff, newsdesk@platts.com

(Platts, Nov 17, 2008)