The current operational slump is more severe than the demand destruction seen during the 2020 pandemic. Data from consultancy JLC indicates that the industry is struggling under the weight of a broader energy squeeze, as crude imports across China recently touched an eight-year low. The average national run rate for refineries hit 66.3% in May, with processed volumes contracting by 9.1% compared to the previous year.

These independent refiners face a precarious path forward. High crude prices, exacerbated by supply shocks from the Middle East, have eroded profit margins that were already thin. Authorities have further tightened the market by restricting fuel exports to ensure domestic supply. Compounding these pressures is a structural shift in the Chinese transportation sector, where the rapid adoption of electric vehicles continues to dampen long-term demand for traditional fuels. With Shandong stockpiles currently exceeding 2025 volume targets, analysts remain skeptical of a near-term recovery, even with recent fluctuations in global oil prices and temporary waivers for Iranian crude.