China's naphtha imports to rise ahead of tax revamp
Chinese importers of naphtha could boost stocks in the first quarter of 2026 ahead of an imminent consumption tax on the petrochemical feedstock that will raise costs for suppliers, traders and analysts said.
The proposed 2,105 yuan ($302) per ton levy would apply to naphtha sold domestically, according to Chinese consultancies GL Consulting and FGENexant.
The tax, aimed at plugging a tax loophole and boosting state revenue, could deepen margin pressure on long-struggling petrochemical producers and exacerbate cash flow strains amid weak demand.
Local tax authorities told naphtha suppliers in December that domestic sales of the feedstock would be subjected to consumption tax and associated surcharges from the first quarter of 2026, consultancies GL Consulting and FGENexant said in separate notes. These taxes, which were previously waived, would apply to naphtha transactions between refineries and end-users.
Taxes to raise costs. "This step will hit petrochemical margins," Armaan Ashraf, director of natural gas liquids and Asia oils at consultancy FGENexant said. "It is aimed at plugging a loophole in the policy where some producers sought exemption from tax on naphtha being used as (gasoline) blendstock instead of ethylene or aromatics production."
While sellers can seek tax rebates, there is a longer processing period of three to six months for domestic supply compared with imported cargoes, they said, which will tighten companies' liquidity and increase their financial costs.
Also, sellers of domestic naphtha have to pay an additional 12% social security tax surcharge that is not refundable, which could make imports more profitable, a state oil official said.
State refineries most affected. Zhaojun Bian, an analyst at Chinese consultancy JLC, said state-owned refiners would be most affected by the taxes as they are the dominant suppliers.
The official and FGENexant's Ashraf expect importers to buy more naphtha in the first quarter as the taxes may reduce demand for domestic supply in the initial weeks of implementation.
Meanwhile, Chinese naphtha importers, including CNOOC, Sinopec's trading arm Unipec, have been seeking additional spot supplies at premiums between $1 and $4 per ton to Japan quotes for second-half February delivery, market participants said, adding that the buying was likely precautionary ahead of policy change.
According to Kpler shiptracking data, CNOOC has purchased nearly 221,000 metric tons (about 2 million barrels) of naphtha in January to date, up 12.6% from a year earlier.
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