China’s new independent refiners are flourishing under the national vision at a time when their older rivals have been reined in by the central government. Companies like Zhejiang Petroleum and Chemical Co., Hengli Petrochemical Co., and Jiangsu Eastern Shenghong Co. are still little known in global trading circles. However, they are expected to become more influential in international markets soon.
These refiners, called teapot 2.0, have built vast refining facilities that are more environmentally conscious and focused on processing crude to produce plastics and petrochemicals rather than polluting transportation fuels. Teapot 2.0 companies also built their complexes far away from crowded areas where Beijing wants to cut emissions. Analysts said that this business model provides these refiners with tax benefits or larger quotas to import crude oil.
Once a producer of synthetic fibers, Shenghong erected China’s largest refining tower in June. The company’s shares have rallied more than fourfold since its refining project started two years ago. Hengli’s shares have more than tripled since its first refining complex opened in late 2018. On the other hand, the government launched a crackdown on tax violations and the misuse of oil import quotas among older teapots. Some of these refiners have their import quotas slashed, giving newer firms the upper hand.
