China diesel use slumps as natural gas, gasoline demand gains

JAN 25, 20162:12 PM

[HONG KONG] China's diesel consumption contracted for a second year as its economy shifts away from industrial investment toward consumption-led growth. Gasoline and natural gas demand rose.

Diesel use in 2015 dropped 3.7 per cent from the previous year, National Development and Reform Commission said in a statement on its website. The contraction is greater than the 1.5 per cent decline in 2014. Gasoline and natural gas consumption rose 7 per cent and 5.7 per cent, respectively.

China's fuel use reflects divergent economic trends as gasoline demand in the world's largest automobile market is rising while cooling industrial production damps diesel consumption. Industrial output grew at 6.1 per cent last year, the slowest pace on record since at least 1999. China's total vehicle sales are expected to increase 6 per cent this year after rising to a record in 2015.

"China has adopted an economic development shift away from industrial-intensive drivers toward being more services oriented,"  Lin Jiaxin, a Guangzhou-based analyst with research company ICIS-China, said by phone.

"Diesel demand is damped as industrial activities slow." Diesel consumption, a barometer of the country's industrial activity, will stay flat or fall in 2016, while gasoline use will rise by 200,000 barrels a day, according to an International Energy Agency forecast last month. The country's diesel exports surged 75 percent last year to a record.

China's diesel demand will grow at an average annual rate of 1.3 per cent through 2025 as gasoline use expands 6.2 per cent, ICIS-China said last week in a report. Gasoline consumption will surpass diesel for the first time in 2024, it said.

Natural gas demand last year rose 5.7 per cent to 193.2 billion cubic meters, the NDRC said Monday. A price cut in November probably helped raise sales at the end of the year, according to Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd, a research company. Consumption during the first 11 months of the year had increased only 3.7 percent, according to Mr Tian.

"I expected natural gas sales to see a big jump in December, so it helped cover up rather sluggish sales in the first eleven months," Mr Tian said by phone.

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