Chinese Refiners Deepen Losses As Overcapacity Weighs on Margins
China’s refining and petrochemicals sector saw losses across the industry rise by 8.3% in the first half of 2025 compared to the same period last year, as overcapacity and price wars continue to plague many Chinese industries.
Refining and chemicals firms have not been spared from the so-called “involution”, which refers to excessive and self-defeating competition among Chinese companies for limited resources and opportunities.
The sector faces the destructive price wars, too, according to a senior executive at the China Petroleum and Chemical Industry Federation quoted by Reuters.
Losses in the refining industry alone jumped by more than $1.25 billion (9 billion Chinese yuan) in the first half of the year from the first half of 2024, the federation noted.
Chinese refiners have been struggling with both overcapacity and lackluster domestic fuel demand so far this year.
China has promised to address the overproduction that is creating hardships for its oil refining and steel-making industries.
As a result of the destructive competition and price wars, oil refiners and steel-makers have been the worst performers in terms of earnings among industrial companies, according to data compiled by Bloomberg.
China’s state-controlled energy giants have started to admit that the so-called new energy vehicles – the ones not running on refined petroleum products – are eating up domestic road fuel demand, which has already peaked.
China National Petroleum Corporation (CNPC), the controlling shareholder of PetroChina, acknowledged as much in its outlook unveiled in April.
The overcapacity only adds to the weaker fuel demand, and it has become a problem in many other Chinese industries, too.
China’s undisputed leadership in electric vehicle sales and renewable energy expansion has come at a cost for numerous companies that have been running a race to the bottom in recent years. The surge in EVs and solar and wind power installations has resulted in excessive manufacturing capacity in these key clean energy industries, igniting price wars that have hurt most companies in the cleantech sector, including the biggest solar panel manufacturers.
By Tsvetana Paraskova for Oilprice.com
