China to Cut Import Duty for Oil Products

China will lower import duties for diesel and jet kerosene to zero and also cut those on fuel oil to one percent from three percent from July 1, a move likely to boost imports of these fuels as summer power demand grows.

The country is facing not only a power crunch that could lead to imports of diesel to fire generators, but is also battling inflation that in May hit a 34-month high.

The ministry said on its website (www.mof.gov.cn) the current duty for jet kerosene is 6 percent. It did not specify the current rate for diesel.

"It may be a signal that the government is taking pre-emptive steps in case the country needs to import diesel if a power shortage gets serious," said a Beijing-based middle-distillates trader.

But traders said though zero duty for diesel may spur imports and lift Asian middle distillates market , the decision and pace of diesel imports lies with the country's oil duopoly Sinopec and PetroChina which control most of the import permits.

"It won't mean a big rise in imports, which have been nearly none in the past months," said a Singapore-based trader, adding that the domestic Chinese market was amply supplied with inventories now climbing and demand growth easing after Beijing repeatedly tightened credit supplies.

By slashing jet fuel duty to zero from six percent, the government may also be aiming to help airlines which now face increasing competition from China's rapidly expanding high-speed railways, said the first trader.

Traders said the cut in the fuel oil tariff, which applies only to grades No. 5-7, may give a boost to imports of the residue fuel, of which China is Asia's largest buyer.

The grades include cracked fuel oil that is used for power generation, and also Russian fuel grade M-100, which feeds into local small refineries for further processing.

The Ministry also said it would cut the import duty on nickel scrap and zinc scrap to one percent from 1.5 percent and refined zinc to 1 percent from 3 percent.