China upbeat on gasoline demand as gas guzzlers become popular
Singapore (Platts)--7May2015/359 am EDT/759 GMT
The Chinese bought nearly 49% more gasoline-guzzling sports utility
vehicles, or SUVs, in the first quarter of 2015 compared with Q1 2014 --
a statistic that is expected to support China's gasoline demand growth.
According to data from the China Association of Automobile
Manufacturers, sales of multi-purpose vehicles, or MPVs, rose by 19.3%
year on year in Q1.
The trend of strong sales growth in these gasoline guzzlers more than
offset the adverse impact on gasoline demand due to overall slowdown in
vehicle sales growth in China.
According to CAAM, total vehicle sales rose just 4% year on year in Q1
compared with 9% a year earlier. In a research note covering state-owned
PetroChina published April 29, Nomura Research said the increasing
popularity of SUVs in China could translate into higher-than-expected
gasoline sales.
"Although fuel efficiency is increasing, SUVs in general can burn 20%
more fuel versus lighter sedans with comparable engines," Nomura said.
According to CAAM, SUV sales are expected to grow by 25% to 5.1 million
units, and MPV sales are expected to increase by 35% to 2.58 million
units in 2015.
Based on the forecast from CAAM, SUV and MPV sales will account for 30%
of total auto sales this year, up from 25% seen in 2014, according to
Platts calculations.
This proportion of SUVs and MPVs in China is still lower than the
proportion of SUVs and crossovers, or CUVs, in the US, which accounted
for 36.5% of the total auto sales in 2014, according to data from IHS
Automotive. This may imply that China's SUV and MPV sales volume has the
potential to still rise in the future.
"People now tend to favor SUVs among all other categories of passenger
cars, as SUVs are more suitable for self-driving over long distances," a
source in the car industry said.
Since 2013, the government has also suspended highway tolls during major
public holidays, including the week-long National Day and Chinese New
Year holidays, making it more cost efficient for people to drive long
distances.
Not surprisingly, China's apparent demand for gasoline -- calculated
by taking into account domestic production and subtracting net exports
-- rose 8% year on year during the first quarter to 27.67 million mt, or
an average of 2.61 million b/d.
The strength of this Q1 growth was not accounted for by inventory
changes.
According to Xinhua OGP data, gasoline stocks declined in Q1 2015
whereas they actually rose over the same period in 2014, suggesting
actual consumption growth was higher than apparent demand in the first
quarter.
This was slightly firmer than the growth rate of 7.8% seen in Q1 2014,
and compares with a growth rate of 4% year on year to 10.48 million b/d
for overall oil demand in Q1 2015.
Apparent gasoline demand rose a hefty 12.5% in 2014, but there were some
signs since the second half of 2014 that this pace may not be
sustainable because of moderating growth in auto sales after two
successive years of double-digit growth.
But that scenario may now be changing given the blistering pace of
growth in SUVs and MPVs sales.
Since November last year, gasoline apparent demand has surpassed 2.5
million b/d and now accounts for nearly a quarter of total apparent oil
demand, up from 22% at the end of 2013.
CRACKDOWN ON BLENDERS PROMPTS STRONGER STATE-OWNED OUTPUT
A factor propping up apparent demand for gasoline in Q1 2015 has been a
concerted effort by the government to clamp down on independent oil
blenders producing off-specification fuel that do not meet the current
National Phase 4 standard.
As a result, many blenders -- who essentially operated out of small
workshops with a few oil tanks and a circulation pump and are located
mostly in the eastern Shandong and southern Guangdong provinces -- have
suspended operations, prompting refiners to raise their domestic
production of gasoline to meet the supply shortfall.
Gasoline produced by blenders was not captured by official statistics so
the higher production by refiners to compensate for the shortfall has to
some extent inflated the apparent demand figure in Q1 2015.
But a source at Sinopec's oil product sales branch in Guangzhou said
that actual demand for gasoline was strong and this is reflected by
continually rising wholesale prices since earlier this year.
The company offered Phase 5, or 10 ppm sulfur, 92 RON gasoline at Yuan
8,400/mt ($1,374/mt) on Wednesday, a significant increase from around
Yuan 5,300/mt at the end of January, according to the source.
PetroChina said Q1 gasoline sales rose 16.3% year on year to 15.33
million mt, a significant gain versus the same period of 2014, when
growth was only 1.5%.
Sinopec did not break down its sales volume by product but also
likely saw strong demand for gasoline given that its output of the fuel
during the quarter rose 11% from a year earlier to 13.29 million mt.
--Staff, newsdesk@platts.com
--Edited by E Shailaja Nair,
shailaja.nair@platts.com; with Song Yen Ling
yenling.song@platts.com and
Mriganka Jaipuriyar,
mriganka.jaipuriyar@platts.com
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