The Zhitong Finance App learned that Donghai Securities released a research report saying that domestic refining production capacity has entered a period of high structural adjustment. More than 40% of the production capacity has been formed or upgraded in the past ten years. Massive “middle-aged” devices will become the main players in the next stage of energy saving and efficiency improvement, intrinsic safety, digitalization, and product structure upgrading. Old refineries in Europe, Japan, and Australia continue to withdraw, and the raw material advantages of Middle Eastern companies may also be partially offset by geographical conflicts and transportation costs. The relative competitiveness of China's integrated bases is expected to improve. Maintaining high oil prices helps upstream resource-based enterprises maintain capital expenditure and increase storage and production.
The main views of Donghai Securities are as follows:
Domestic refining capacity has entered a period of high structural adjustment
In 2025, the country's refining capacity was 939 million tons/year; according to a sample of 321 enterprises compiled in this report, the total production capacity of conventional primary refining and normal pressure reduction was 860.6 million tons/year, with the six major groups accounting for 69.4%. Among them, production capacity with a service age of no more than 10 years, 11-20 years, and 21 years or more accounted for 43.4%, 44.0%, and 12.6%, respectively. More than 40% of the production capacity has been formed or upgraded in the past ten years. Massive “middle-aged” devices will become the main focus of the next stage of energy saving and efficiency improvement, intrinsic safety, digitalization, and product structure upgrading.
The industry is shifting from incremental expansion to volume reduction, replacement and integration of refining and chemical engineering
From 2000 to 2025, a total of 107.46 million tons/year was withdrawn from domestic refining production capacity, of which 70.9% of total withdrawals in 2015, 2022, and 2025; however, the commissioning of new projects and capacity expansion during the same period continued to drive overall capacity growth. As crude oil processing capacity is controlled to less than 1 billion tons, inefficient equipment is upgraded and decommissioned, and policies to renew old equipment are promoted, more new projects will be implemented through capacity replacement and extended to support the ethylene, aromatic hydrocarbons, high-end materials, and park industry chains.
China's integrated refining and chemical base has the advantage of scale and industrial chain synergy
In 2024, the refining capacity of China and the US was 18.514 million b/d and 18.416 million b/d respectively, which is already at a similar level; however, the utilization rate of China's refinery is about 79.0%, lower than the US's 88.1%, and the export scale of refined oil products is also significantly lower. China's crude oil is highly dependent on the outside world, but large coastal bases can cushion cost impacts through shared utilities, flexible switching between oil products and chemical raw materials, and neighboring domestic markets. Old refineries in Europe, Japan, and Australia continue to withdraw, and the raw material advantages of Middle Eastern companies may also be partially offset by geographical conflicts and transportation costs. The relative competitiveness of China's integrated bases is expected to improve.
The lack of effective supply due to geographical conflicts supports short-term refining profits, but at the same time pushes up domestic refinery costs
Energy facilities and transportation channels in the Middle East were disrupted in 2026, diesel supply became tight, tanker freight rates rose sharply, and the increase in nominal refining capacity coexisted with insufficient production capacity that could actually be started. China's refineries are affected by rising crude oil import costs and working capital, and exports of refined oil products are also subject to inventory and quotas. The degree of integration, export qualifications, and product adjustment capacity will determine whether enterprises can benefit from overseas price differences.
The medium- to long-term supply of global refining may still be uneven in the future
According to the IEA's latest “OIL 2025” report, global refining capacity is expected to increase net by about 2.54 million b/d from 2024 to 2030, while demand for refined oil products will peak by 2027, an increase of only 710,000 b/d compared to 2024. New supply is significantly faster than traditional oil demand. The focus of oil demand growth is shifting towards petrochemical raw materials, but natural gas liquids can bypass refineries and enter chemical installations, and refining production capacity cannot fully share the relevant increases. The profit centers of traditional refined oil products and basic chemicals are under pressure, while aviation fuels, specialty oils, high-end polyolefins, electronic chemicals, and low-carbon raw materials are still expected to form structural opportunities.
Investment advice
Maintaining high oil prices helps upstream resource-based enterprises maintain capital expenditure and increase production. It is recommended to focus on CNPC and CNOOC; in the refining process, focus on companies with hydrocracking, refining-PX-PTA integration, and strong competitiveness in the stock market, such as Hengli Petrochemical, Rongsheng Petrochemical, Hengyi Petrochemical, Tongkun Co., Ltd., and Dongfang Shenghong. Also, satellite chemistry, which benefits from the contraction of overseas ethylene production capacity and has the cost advantage of ethane cracking.
Risk warning: macroeconomic fluctuations and downside risks in oil prices; risk of geopolitical instability; overseas business development falls short of expectations; production capacity investment under construction falls short of expectations.