China's Shandong raises fuel oil import tax rebates for some refineries, sources say
The Shandong provincial tax bureau increased the consumption tax rebates that the independent refiners, also known as teapots, will receive for the sale of gasoline and diesel refined from imported fuel oil by 25 percentage points to between 75% and 95%, three sources with direct knowledge of the matter said this week.
The change applies to Chambroad Petrochemicals, Hongrun Petrochemical, Lihuayi Group, Xinyue Group, Shandong Jincheng Petrochemical Group and Xintai Petrochemical, the sources said.
The refiners were notified about two weeks ago, said one of the sources.
The Shandong Provincial Tax Service, the national State Taxation Administration and the companies did not respond to Reuters' requests for comment.
The teapots often choose to process straight-run fuel oil or tar-like heavy residue called bitumen blend into transportation fuels when crude prices become too expensive and they are under crude oil import quotas that can limit their purchases.
China enacted higher import tariffs on fuel oil at the start of 2025 and at the end of last year reduced the tax rebates on fuel oil shipments. That led to fuel oil imports declining to their lowest ever for the January-May period, according to customs data.
FGE's Associate Director of the East of Suez Oil Service Mia Geng said in a June 27 note the independent refiners had been suffering from low margins and shutdowns as a result of the rules and the provincial government likely also wanted the refineries to run more to boost industrial output and economic activity.
Geng expects the tax changes should increase high-sulphur fuel oil demand and raise the refineries' run rates.
However, the changes are unlikely to spur fuel oil demand in the short-term since crude oil is currently cheaper, a trading source and one of the sources with direct knowledge of the change said.
The refiners in Shandong are China's main buyers of cheap sanctioned oil from Russia and Iran.
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