Peiyang Chemical Equipment Co., Ltd.
The Alliance
The Alliance's Review of Work and Its Next Plan

The setting background of purchasing alliance of independent refiners

The releasing for usufruct and import right of imported crude oil brings about the new developing opportunity for the independent refining and chemical enterprises. However, it also creates many disadvantages and challenges.

The characteristics of independent refining enterprises:

1. They are lack of market status so that they can not get enough resources; they lack international negotiation business, which leads to the bad situations including easy bidding, unhealthy competition and so on.
2. The domestic and international executive capacity is obviously lacking; the purchasing quantity is too small, which will definitely cause the price to be on the high side, and the enterprises will put more money on unnecessary costs into it.

3. The majority of enterprises can not bear a large order at one time and excessive financial pressure. Their credit capacities are insufficient and their payment with letter of credit is limited.

4. There are only Huangdao and Rizhao having VLCC receiving terminals. Dongying port which owns much more refining and chemical industries can load and unload the oilers under 100,000dwt. Small boats have higher transportation costs.

The purposes of establishing the purchasing alliance of independent refiners:

1. To avoid disorderly bidding and reducing bad competition
2. To enhance the intensive efficiency
3. To intensify loans and settlements, and to reduce capital pressure and interest
4. To centralize the logistics to reduce the transportation costs
5. It is good for helping China Petroleum, Sinopec, CNOOC and other central enterprises import departments play synergistic roles.

Alliance platform company - Singapore Pacific business holding company.

In the first half of 2016, the average CIF price of crude oil purchased by Dongming petrochemical company was 200USD/ tons, representing an average price of 40.1USD/ tons. It was lower than that of Qingdao port, and it was 16.7% lower than that of the same period in the whole country.

The advantages of overseas platforms: overseas purchasing team has rich experience in the operation of crude oil, paper and cargo, so they substantially reduce the cost of purchasing crude oil.
The superiority of low financial expense: based on wholly—owned overseas subsidiaries - Hongkong Hengfeng Trade Co. Ltd and Singapore Pacific Commercial Holdings Limited, Dongming Petrochemical Company makes best use of the benefits of low-cost overseas funds and the average annual cost of overseas comprehensive financing to make its interest rate remained at 2%, far below the 4.35% of annualized financing costs in our nation.

After the setting up of the alliance, it has carried out some thematic activities including "going into the Dongming petrochemical", "going into the Singapore", "going into the Qingyuan group, entering the Tianhong chemical" , "havingspecial discussion on landing scheme in Ji'nan and purchasing scheme ", "going into Lu Qing", "going into Korean" and "going into Wudi Xin yue" in March, Aril, May, June, July, August,September and Octorber respectively. It aims at helping inferior alliance members to understand the development of the international crude oil market and international petrochemical industry trends, enhance their purchasing ability for international crude oil, strengthen their communication and understanding between members of the alliance, and organize the alliance member units to participate in business training to study the major oil companies.

It has taken advantage of the Singapore Pacifi Corp international procurement platform to purchase nearly 13 million tons of crude oil for union member enterprises (including Dongming petrochemical) since 2016.


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