UPDATE 1-China levies consumption tax on biodiesel, kerosene imports

Thu Jan 2, 2014 12:58am EST

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* Imposes 0.8 yuan/litre tax on biodiesel, some types of kerosene

* Move may curb China's diesel exports, support Asian refining margins (Adds details)

BEIJING Jan 2 (Reuters) - China started levying a consumption tax on imported biodiesel and some types of kerosene from the start of the new year, the customs office said, a move aimed at curbing imports of the fuels that have taken market share from state refiners.

The tax could create a supply gap for diesel in the world's second largest oil consumer that would force state refiners to scale back exports. That would support Asian processing margins, which have been recently boosted by a refinery outage in Taiwan.

The government imposed a consumption tax of 0.8 yuan ($0.13) per litre on biodiesel, lamp kerosene and other kerosene grades, Chinese customs said on its website (www.customs.gov.cn).

Biodiesel imports, mostly by private companies, surged to an estimated 1.7 million tonnes in 2013 on tax and trade incentives. But some shipments contain a far lower biofuel component than required by China, according to sources.

As a result, imported biodiesel displaced local diesel sales, prompting state refiners Sinopec Corp and PetroChina to boost diesel exports to record highs last year.

Small refiners and independent fuel dealers in late 2010 imported power kerosene, a blend not subject to consumption taxes and that could be easily turned into diesel. The practice eventually led to detention and fines for two traders.

($1 = 6.054 Chinese Yuan) (Reporting by Judy Hua, with additional reporting by Jessica Jaganathan in SINGAPORE; Editing by Tom Hogue)

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