(EnergyAsia, March 31 2011, Thursday) — Chinese fuel storage and distribution firm Longwei Petroleum Investment Holding Ltd said it expects to benefit from the 4.5% increase in gasoline and diesel prices enacted last February 21 by the powerful National Development and Reform Commission (NDRC).
New York Stock Exchange-listed Longwei said the increase, which translates to US$53.20 per ton, is the second such adjustment in the past two months based on a mechanism that allows the NDRC to adjust fuel prices when the cost of crude oil changes by more than 4% over a period of 22 working days.
China, the world’s second-largest oil consumer, reported an overseas oil dependence ratio of 55% in 2010. Figures from the National Bureau of Statistics show that the country imported 239 million metric tons of crude oil last year, up 17% from the previous year.
With such large percentages, “the impact of international crude price changes on the Chinese market carries increasing significance,” an official with the NDRC said.
Oil has been trading at two-year highs of over US$100 per barrel since late January amid growing concerns of unrest in the Middle East.
Cai Yongjun, Longwei president and CEO, said:
“The NDRC’s decision will allow us to raise prices of our fuel products, which we anticipate will have a positive effect on our revenues and profits going forward. We also expect to experience a slight gross margin improvement, as our inventory on-hand is recorded on a weighted average basis and will be sold at higher market prices.
“Given the increase in demand for fuel and oil products as well as the fuel price increase, we are confident in our ability to meet our guidance of US$500 million in revenues and US$70 million in net income, or US$0.62 EPS, for fiscal 2011.”
Headquartered in Taiyuan City in China’s Shanxi Province, Longwei Petroleum stores and distributes finished petroleum products, supplying coal mining operations, power supply customers, and large-scale as well as small, independent gas stations.
The company’s storage tanks in Taiyuan (50,000 metric tons) and Gujiao (70,000 metric tons) have the largest storage capacity of any non-government operated entity in Shanxi.
Longwei Petroleum also earns revenue under an agency fee by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the company’s facilities.