Sinopec, formally known as China Petroleum and Chemical Corp., posted a slight increase in profit for the first half of 2024, driven by stronger upstream operations despite challenges in its core fuel processing and sales sectors. The company’s net income for the first six months of the year rose 1.7% year-on-year to 35.7 billion yuan ($5 billion), on revenue of 1.58 trillion yuan—a 1.1% decrease.
The growth in net income was largely attributed to a 15% increase in exploration and production, bolstered by higher international crude prices and increased output. However, this positive performance was countered by a 38% decline in oil processing and a 14% drop in marketing and distribution, with diesel, a key construction fuel, experiencing particularly weak demand. Sinopec’s chemicals division continued to report losses, although these were reduced compared to previous periods.
Crude refining remains one of China’s least profitable industries, with accumulated losses reaching 16 billion yuan ($2.2 billion) in the first half of the year. Contributing factors include increased prices and transport costs due to ongoing conflicts in the Red Sea. Additionally, the long-term decline in gasoline consumption, driven by the energy transition towards electric vehicles and gas-fueled trucks, and faltering diesel demand due to China’s property crisis, have exacerbated the industry’s struggles. The sector faces further pressure from a glut in petrochemical products amid a broader economic slowdown.
Sinopec’s extensive refining operations are more vulnerable to fluctuations in China’s industrial and retail consumption compared to its more upstream-focused counterparts. PetroChina Co. is set to release its earnings later on Monday, following a strong first quarter, with Cnooc Ltd. scheduled to report on Wednesday.
Following the earnings announcement, Sinopec’s stock rose as much as 1.8% in Hong Kong, aligning with market expectations. The company remains optimistic about the second half of the year, anticipating improved economic conditions and increased demand for natural gas and chemicals. Sinopec plans to maintain its oil processing and product sales levels from the first half, though with reduced diesel volumes.
On the Wire
1.SAIC Motor Corp. faces difficulties with European Union regulators, highlighting the challenges for Chinese firms in Western markets.
2.Goldwind Science & Technology Co., the world’s leading wind turbine manufacturer, reported higher profits for the first half of 2024, driven by China’s expanding renewable energy sector.
3.Sungrow Power Supply Co., China’s largest solar equipment maker by market capitalization, also reported a significant profit increase, benefiting from continued growth in the country’s renewable power sector.
This Week’s Diary(All times Beijing unless noted)
Monday, Aug. 26:
1.China sets monthly medium-term lending rate, 09:20
2.Sinopec earnings briefing in HK, 15:00
3.EARNINGS: PetroChina
Tuesday, Aug. 27:
1.China’s industrial profits for July, 09:30
2.Qingdao Multinationals Summit, day 1
3.EARNINGS: Baosteel, Tongling Metals, Anhui Conch, China Oilfield, China Resources Power, Yunnan Energy, TCL Zhonghuan
Wednesday, Aug. 28:
1.CCTD’s weekly online briefing on Chinese coal, 15:00
2.PetroChina earnings briefing in HK, 16:00
3.Qingdao Multinationals Summit, day 2
4.EARNINGS: Cnooc, BYD, Gotion, Ganfeng Lithium, CNGR, Chalco, Jiangxi Copper
Thursday, Aug. 29:
1.Cnooc earnings briefing in HK, 16:15
2.Qingdao Multinationals Summit, day 3
3.EARNINGS: Longi, Tongwei, Windey, GCL-Poly, Hesteel, Shandong Steel, Maanshan Steel, GEM, Ningbo Shanshan, China MCC, Cosco
Friday, Aug. 30:
1.China weekly iron ore port stockpiles
2.Shanghai exchange weekly commodities inventory, ~15:00
3.EARNINGS: Tianqi, Jinko, JA Solar, Ming Yang, Yangtze Power, Three Gorges, Shenhua, Angang Steel, Citic Ltd.
Saturday, Aug. 31:
1.China’s official PMIs for August, 09:30
Sunday, Sept. 1:
1.China International Steel Congress in Shanghai, (through Sept. 2)
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