According to Houston Bloomberg News, as OPEC cuts production and U.S. sanctions against Venezuela begin to curb its exports, the number of foreign oil flowing into the U.S. coast is declining.

In January, OPEC and its partners’crude oil shipments to the United States fell to 1.41 million barrels a day, the lowest level in five years, according to data from cargo tracking and intelligence firm Klager. The reduction in Iraqi imports and the dramatic reduction in Saudi Arabia’s production have contributed to the decline in transport volumes.

Meanwhile, Venezuela’s exports to the United States fell by nearly 30%. The reason is that nearly half of the crude oil has not yet entered the U.S. ports, and U.S. sanctions may leave the remaining crude oil in the Gulf. According to Kogler, nearly 7.6 million barrels of Venezuelan crude oil are floating in the Gulf of Mexico.

I. Basic Situation of Industry Operation

(1) Production has increased steadily and investment has recovered. In 2018, the output of ten kinds of non-ferrous metals was 56.88 million tons, an increase of 6% year on year. Among them, the output of copper, aluminium, lead and zinc was 9.03 million tons, 35.8 million tons, 5.11 million tons and 5.68 million tons, respectively, which increased by 8.0%, 7.4%, 9.8% and -3.2% year on year, while the output of copper and aluminium was 17.16 million tons and 45.55 million tons, respectively, which increased by 14.5% and 2.6% year on year. In 2018, the investment in fixed assets in non-ferrous industry increased by 1.2% year on year. Among them, the investment in mining and mineral processing decreased by 8% year on year, while the investment in smelting and processing increased by 3.2% year on year. The scale expansion has shifted to increasing technological innovation such as environmental protection and safety, as well as research and development of high-end materials and new technologies.

(2) Price volatility has fallen, and the benefits of the industry have declined substantially. In 2018, the average spot prices of copper and lead were 50689 yuan/ton and 19126 yuan/ton, respectively, rising by 2.9% and 4.1% year-on-year respectively, with an increase of 26 and 22 percentage points. The average spot prices of aluminium and zinc were 14262 yuan/ton and 23674 yuan/ton respectively, down by 1.8% and 1.7% year-on-year. The main business income of non-ferrous Enterprises above the scale is 5428.9 billion yuan, an increase of 8.8% over the same period of last year; the profit of 185.5 billion yuan, a decrease of 6.1% over the same period of last year; the profit of mining and processing is 41.6 billion yuan, which is the same as that of last year; the profit of smelting and processing is 67.9 billion yuan and 75.6 billion yuan, respectively, a decrease of 10.2% and 5.6% over the same period of last year, especially that of aluminium industry, whose profit declines by

(3) The situation of import and export has changed and positive progress has been made in overseas investment. The annual export of unwrought rolled aluminium and aluminium products was 5.8 million tons, an increase of 20.9% over the same period of last year. With the implementation of the policy of prohibiting foreign garbage entry, the import of copper scrap dropped 32.2% and the import of refined copper increased 15.5% year on year. Overseas resources development has been vigorously promoted, and overseas projects such as China Aluminum Group, Minmetals Group, Zhongjin Lingnan and Weiqiao have made new progress.

(4) Structural reform on the supply side has been deepened and the transformation and upgrading of the industry has been accelerated. Production capacity control and restructuring achieved results. More than 3.3 million tons of electrolytic aluminium production capacity was transferred to energy-rich areas such as Inner Mongolia and Yunnan through capacity replacement. China Aluminum integrated Yunnan metallurgy, Shandong Weiqiao Holdings Co., Ltd. and other joint restructuring continued to advance. De-leveraging has made progress, with the industry’s asset-liability ratio of 62.2%, down 0.6 percentage points from a year earlier. With the acceleration of filling plate, 7050 full-size aluminum alloy thick plate has been licensed to install, aluminum air battery and nano-ceramic aluminum alloy have been industrialized, energy consumption of copper and aluminium smelting has been declining, and the level of green development has been continuously improved.

II. Problems Faced

(1) Costs are rising and consumption is sluggish, and the pressure on the operation of the industry is increasing. From the production side, affected by the rising cost of raw and auxiliary materials such as minerals, raw materials, coal, electricity and the increasing investment in environmental protection, the main business income cost per 100 yuan in the industry in 2018 is higher than the average industrial level of 3.97 yuan, an increase of 0.58 yuan over the same period of last year, especially the average comprehensive cost of electrolytic aluminium. From the consumer side, the traditional consumption fields such as real estate, electricity, automobile and household appliances continue to weaken, and the new application fields with large quantity, wide range and strong driving force need to be expanded. In addition, private enterprises are an important part of the non-ferrous industry, but because of the high cost of financing and heavy non-operational burden, there are still barriers in undertaking major projects and other aspects, and the development pressure is greater.

(2) The low-end surplus and shortcomings are prominent, and the deep-seated problems of industrial structure are prominent. Strictly controlling the new capacity of electrolytic aluminium is still arduous. There is a risk of overcapacity in some low and middle-end processing areas. There is also a rapid expansion of stage capacity in some emerging areas such as lithium salts and precursors of ternary materials. There are shortcomings in high-end materials and green smelting. The key non-ferrous materials for aerospace and integrated circuits are still dependent on imports. In 2018, the unit price of aluminium imports is 1.9 times that of exports. Some smelting industries still lack industrialized technical support to achieve special emission limits. Pollution prevention and control is still an important bottleneck restricting the green development of the industry.

(3) The international trade situation is complex and the development environment is becoming increasingly severe. With the increase of uncertainties in the global economic trend and the substantial impact of trade friction, it is difficult to sustain the sustained growth of aluminium exports. The blockage of exports of non-ferrous terminal consumer goods such as electromechanical, automotive and other non-ferrous consumer goods will also increase the pressure of industry operation. Because of the strong financial attribute of non-ferrous metals, the indirect impact of trade frictions on the industry is even greater than the direct impact, impacting market confidence, prices and investment, affecting the development of the industry.

Key Work in 2019

(1) Make excellent increments and accelerate the innovative development of new non-ferrous materials and new formats. We will expand the upstream and downstream cooperation mechanism of civil aircraft aluminium materials into the cooperation mechanism of civil aircraft materials, promote the implementation of key annual tasks, track the progress of new energy vehicle platform construction, strengthen supervision and coordination, and form annual symbolic work results. Implementing the new material “filling board”, establishing the database of non-ferrous new materials and the industry testing and evaluation center, and improving the basic system of non-ferrous new materials. At the same time, we should promote the deep integration of non-ferrous industry and the Internet, build advanced non-ferrous metal industry clusters, expand application areas, and explore new modes and new formats of industry development.

(2) Optimizing stock and improving the level of intelligent and green development of industrial chain. To formulate guidelines for the construction of intelligent mines and factories for non-ferrous metals and guide the construction of intelligent standardization in the industry. Focusing on the green manufacturing shortcomings of traditional industries such as copper, lead, zinc, tungsten and magnesium in green smelting, ultra-low emission, harmless disposal of waste residue and comprehensive utilization of resources, we should speed up the research and development and promotion of applicable technologies, guide some industrial agglomeration areas to carry out technology supply-demand docking, and guide enterprises to accelerate green development.

(3) Coordinating policies to promote the standardized development of the industry. Promote the structural reform of the supply side, continue to maintain the high-pressure situation of strictly controlling the new capacity of electrolytic aluminium, strictly implement capacity replacement, and guide the high-quality development of alumina and electrolytic aluminium industry through market-oriented and legalized ways. Strengthen policy coordination and service, coordinate and promote industry cost reduction, form a development pattern of mutual promotion between state-owned enterprises and private enterprises, consolidate Sino-Russian cooperation mechanism, improve foreign cooperation platform, guide industry to cope with trade frictions and deepen international cooperation. Revising and promulgating industry normative conditions, reforming management methods, and strengthening the guiding role of normative conditions in promoting industry technological progress and normative development. Strengthen the analysis of hot issues, stabilize market expectations, and promote the smooth operation of the industry.

With the completion of Hengli Petrochemical’s 20 million tons/year refining capacity, China’s refining capacity reached 831 million tons/year by the end of 2018. On January 16, the China Petroleum Economic and Technological Research Institute released the Report on the Development of Oil and Gas Industry at Home and Abroad in 2018 (hereinafter referred to as the “Report”), pointing out that, judging from the comprehensive scale, product quality, energy consumption and integration level, the domestic refining capacity in 2018 was at least 190 million tons per year surplus.

With the rapid growth of refining capacity, the domestic refining industry must accelerate the transformation and upgrading, and further take the road of high-quality development. At the same time, the rise of private advanced refineries and the integration and transfer of traditional local refineries will continue to affect the overall pattern of the refinery industry.

Rapid Rise of Large-scale Geotechnical Refining as the Main Force of New Capacity Increase

According to the data of the Report, in 2018, Hengli Petrochemical Company had 20 million tons/year refining capacity, and China added 33.9 million tons/year refining capacity. At the same time, according to incomplete statistics, six local refineries, such as Haike Chemical, Xinhai Petrochemical and Kokoda Petrochemical, have eliminated a total of 11.65 million tons per year of refining capacity. In total, China’s annual net oil refining capacity increased by 22.25 million tons per year, with private refineries as the main growth force.

From the data, it can be seen that the transformation and upgrading of local refineries are accelerating and showing a trend of differentiation. With the strong support of the local government, some large private enterprises listed in the top 500 of China continue to promote the construction of large-scale refining and petrochemical integration projects with bases, scale, advanced technology and “main oil and auxiliary”. In 2018, Hengli Petrochemical will build 20 million tons/year refining capacity; in 2019, Zhejiang Petrochemical (Phase I) will be built, adding 20 million tons/year refining capacity. By 2020 alone, with these two enterprises, China will add 40 million tons/year refining capacity.

The report points out that with the successive production of large-scale local private refining projects, China’s crude oil processing capacity will increase by 32 million tons per year in 2019, its total refining capacity will reach 863 million tons per year, and its excess capacity will rise to 120 million tons per year. The refining capacity of private enterprises will increase to 235 million tons per year, and the proportion of refining capacity in China will increase to 27.2% from 25.6% last year. The number of ten million tons of refineries in China will increase to 29, of which two are from private enterprises and the scale is world-class.

The data show that Shenghong Petrochemical Company has built 16 million tons/year refining capacity, Zhejiang Petrochemical Company (Phase II) 20 million tons/year refining capacity is under planning, 15 million tons/year petrochemical industry and 16 million tons/year refining capacity of Huatong Jinggang Petrochemical Company are being publicized by the sea, the latter is for introducing foreign investment projects, 20 million tons/year refining capacity of Xinhua Petrochemical Company is being publicized by environmental assessment, and Shida Science and Technology 15 million tons/year refining capacity is being publicized. Ten thousand tons/year refining capacity has entered the approval stage. These capacity may be released by 2025.

Accelerate the integration of backward production capacity and accelerate the elimination of small and medium-sized refineries

With the rise of large private refineries, some small and medium private refineries are accelerating their integration. Shandong Province is the centralized area of China’s georefining, with the production capacity exceeding 60% of the total capacity of georefining. The largest sales area of refined oil in Shandong Province is Shandong Province. Outward radiation can be transported by steam to North and Northeast China, by rail to Northwest and Southwest China, and by water to East and South China.

In recent years, the state has gradually increased its efforts to eliminate and integrate backward refining capacity. On January 9, 2018, China issued the Notice on the Special Treatment of Serious Violations and Breaches of Credit in the Oil Refining Field, which focused on the treatment of serious violations in capacity building, safety, environmental protection, energy conservation, quality, taxation and operation of petroleum products produced from crude oil and fuel oil by processing and refining. Enterprises with dishonest behavior. The circular further implements the industrial policy requirements of “Guiding Opinions of the General Office of the State Council on the Structural Adjustment of the Petrochemical Industry to Promote Transformation and Increase Benefits”, “Guiding Catalogue of Industrial Structure Adjustment (2011 edition) (Amendment)” and “Planning and Distribution Plan for the Petrochemical Industry” (Development and Reform Industry [2014] 2208), and strictly prohibits the construction of new and expanded refining units without authorization.

According to the statistics of the China Petroleum and Chemical Industry Federation, in the first half of 2018, the number of enterprises of more than 1666 sizes decreased nationwide. Among them, there are 1288 refining and chemical enterprises (123 refining and 1565 chemical enterprises).

Also at the beginning of the year, the announcement on issues related to the levy and management of refined oil consumption tax (State Administration of Taxation Announcement No. 1, 2018) blocked tax avoidance loopholes in raw materials. The VAT reform implemented in May has blocked the tax avoidance loopholes in the factory to a certain extent and further rectified the market.

Due to the intensification of renovation efforts, Shandong Geotechnical Refining has also developed differently. According to the principle of “optimization and restructuring, reduction integration, high pressure and low pressure, and integration of refining and chemical industry”, Shandong Province will transfer the reduction integration step by step for local refineries with refining capacity of 5 million tons per year or less, and the reduction and reduction refining capacity will be 1/3 by 2025. At the same time, refineries have accelerated downstream extension, from “one oil dominant” to “both oil and petrochemical” transformation.

Take a differentiated and environmentally friendly road to cope with fierce market competition

The pattern of diversified competition has been formed and will develop with the further development of China’s petrochemical industry. In the oil refining field, BP will build a new 200,000 tons/year lubricating oil blending plant in Tianjin in the third phase, and Shell will build a 10,000 tons project in Qingdao in the second phase of refining catalyst. In the field of oil sales, BP will build 1000 gas stations in China in the next five years. Shell also has plans to build large-scale additional gas stations.

For refining and chemical enterprises, under the increasingly fierce market competition, we must continue to vigorously eliminate backward production capacity, strictly control the increment, and replace backward production capacity with advanced production capacity. For the whole refining industry, we should continue to promote the construction of refinery bases, parks and regionalization. It is suggested that some fuel refineries should turn to material refineries in combination with the characteristics of crude oil and equipment, and pay attention to the development of differentiation and specialization.

It should be noted that 2018 has been described by many media as the “environmental storm” year. In the new year, the intensity of environmental renovation will not decline. Over the past year, China’s main refineries have completed the upgrading of oil quality and the replacement of oil products. Some local refineries also have the ability to produce the 6-standard refined oil by introducing advanced technology. In 2019, China will supply all kinds of gasoline and diesel oil to the country 6. Refineries should arrange reasonable dispatch and replacement of gasoline and diesel oil to achieve a smooth transition.

At the same time, the report pointed out that domestic refineries should continue to promote energy saving and emission reduction, and promote advanced energy-saving technologies, such as enhanced coke burning in catalytic cracking units, high-efficiency stripping in catalytic cracking units, and accelerate the upgrading and transformation project construction, such as focusing on sewage treatment upgrading, sulfur and yellow tail gas treatment and other special treatment projects.