95$/ton gasoline price increase - 5,4m$ additional profit for LPH
Marek, nice find on oil pricing in China. LPH was busy buying gas/diesel when the prices where much lower. The 17 years of business experience for LPH management is making money hand over fist for investors imo.
When the catalysts occur, LPH may hit a new all time high!
There's no information other than what LPH gives in the quarterlies. They are constantly negotiating purchases from multiple sources - there is nothing like a monthly purchase or delivery. Refiners don't publish prices or sales info in China except for broad averages.
LPH will usually (not always) give an average purchase price in yuan/tonne for the quarter or year in the statements, but it's not a detailed breakdown by product and you have no idea of timing (agreed / contracted / gated / delivered). There's no other source for that information besides LPH. At best, it's only rough guide to help explain margins.
There's a formula the NDRC uses to provide a *minimum* profit margin for wholesalers like LPH (~400 y/Tn IIRC), which means the maximum price a refinery can charge is effectively 400y/Tn less than the maximum retail price (exceptions for 'state' consumers like the army, schools, hospitals, etc).
Refiners and wholesalers can always charge less if they want, and a retailer can sell at less than the published price caps. This is pretty rare though, and only happens when the state-set retail maximums lag a drop in world market crude prices.
The situation has been the exact opposite for the last couple of years: world crude prices have increased faster than China has adjusted the caps. As a result, the refineries have NOT been able to adjust gate prices of finished products to reflect the global price of crude inputs.
This pretty much means the refinery business loses money by refining. The big outfits make it up on the production and trading side, but smaller refineries that buy spot oil are hosed.
A recent example: Sinopec had refining operating profits of 15Bn Yuan in 2010 with crude at around $80/bbl. They had a refining operating LOSS of 37Bn Yuan in 2011 with world crude at $95/bbl. Even with the next NDRC retail price cap hike (soon), I doubt refining will be profitable in 2012.
Cai scrounges stock from all over the place, but I can't see anyone but the big state refineries even willing to sell anyone finished products in this environment. State refineries are pretty much forced to by the state, but are obviously reluctant to do so if it means guaranteed losses. Small refineries just shut down and refuse to operate at all for a loss. Imports reflect world prices, so I can't see how that would work, either.
LPH's business model might seem straightforward because they are guaranteed to make some profit as long as they have customers. I can't see how that can go on forever if the state's policies also says a refinery must take the hit and operate at a loss for months or years on end in order to 'control' retail gas price inflation.