Shanghai Petrochemical aims to narrow losses amid state curbs on selling prices
Sinopec Shanghai Petrochemical, which operates China Petroleum & Chemical (Sinopec)'s second-largest oil refinery by capacity, plans to cut output by 13 per cent this year to reduce losses amid ongoing domestic control on selling prices.
Chairman Rong Guangdao said the company expected to produce about 3.95 million tonnes of petrol, diesel and kerosene, down 600,000 tonnes from last year.
Shanghai Petrochemical would be better off shutting down its refinery as it was losing 6.54 fen for every yuan of refined oil sales before fixed costs.
It booked a 1.2 billion yuan loss from refining business in the first half, dragging the firm's overall profit down by 99.68 per cent.
Its average first-half crude procurement cost surged 29 per cent year on year to US$64 a barrel, while it was allowed to raise its average refined oil price by only 20 per cent to 3,710 yuan a tonne.
Mr Rong said the company still had to fulfil the minimum production quota required by the government to satisfy demand to avoid economic and social disruption.