CORRECTED-China's jet fuel demand growth to hold steady despite slowing economy -CAO exec

Wed Aug 6, 2014 2:09am EDT

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(Corrects paragraph 6 of Aug 4 story to say CAO supplies half of its 10 million tonnes of jet fuel trading volumes to China)

* Jet fuel demand growth to stay at 10 pct in 2014

* CAO to continue supplying 10 million tonnes jet fuel to China

* CAO looks to airports outside China to counter domestic competition

By Jessica Jaganathan

SINGAPORE, Aug 4 (Reuters) - China's jet fuel demand growth is likely to hold at around 10 percent this year even as the world's second biggest economy faces a broad slowdown, the chief executive at China Aviation Oil (Singapore) said on Monday.

Growth in consumption should hold at about the same pace as in 2013, despite stiff competition from fast and affordable rail, said CAO's Chief Executive Meng Fanqiu.

Jet fuel use in China is growing as its population gets richer and flies more often. The Civil Aviation Administration of China (CAAC) plans to add nearly 80 new airports by 2020, with China to replace the United States as the world's largest aviation market in the next two decades.

"Supply into China has been stable with a slight increase, which is in line with our expectations, even though (the country's) growth rate has slowed down," said Meng on the sidelines of the company's earnings briefing.

China's civil aviation industry grew 10.7 percent in the first half of this year while total jet fuel consumption increased by 11 percent year-on-year, CAO said.

CAO, the sole importer of jet fuel into China, supplies half of its 10 million tonnes of aviation fuel trading volumes to China every year to tap this growth, Meng said. CAO plans to keep overall trading volumes steady.

DIVERSIFY GROWTH

Still, the company faces more competition as refining capacity increases within China, which is able to meet much of the domestic demand growth.

CAO's overall jet fuel supply and trading volumes fell by 9.1 percent to 4.8 million tonnes in the first half of this year compared with the same period last year.

The company also plans to expand its aviation marketing business into more airports outside China. CAO already supplies jet fuel to 32 international airports outside of China, and plans to grow its presence in Europe and the United States as well as "big hub airports", Meng said without any elaboration.

Earlier this year, CAO signed a jet fuel supply contract with China Airlines in Taiwan.

It also plans to continue expanding its trading activities into other oil products, including fuel oil and petrochemicals, and seeks to invest in or acquire strategic oil assets to diversify its income streams, the company said.

CAO on Thursday last week announce that its first-half net profit rose 7.2 percent from a year ago to $37.4 million.

Its overall trading volumes rose 14.9 percent to 9.1 million tonnes in the first half of the year. (Reporting by Jessica Jaganathan; Editing by Tom Hogue)

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