Sinopec's refining unit suffers huge loss in 1st 2 months

Zhenhai Refining & Chemical Co, a unit of China's largest oil refiner Sinopec<600028><386>, booked an amazing loss of RMB 1.37 billion in the first two months of the year, according to official statistics.

This is a typical example of the current situation in Sinopec's refining sector that suffers more losses if it refines more oil, market insiders said. Zhenhai Refining, China's largest refinery, processed 18.6 million tons of crude oil last year, accounting for 12% of Sinopec's total refining capacity and contributed 6% to China's total.

The company raised production to meet booming domestic demand for fuels since last October. However, the oil price set by the government is largely lower than global market and does not reflect the rising material costs.

Oil price is still under government control in China in fears of a big price fluctuation in the sector that may trigger a new round of inflation.