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Longwei Petroleum Investment Holding Limited Message Board

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  • parethnos parethnos Mar 20, 2012 11:41 AM Flag

    95$/ton gasoline price increase - 5,4m$ additional profit for LPH

    I guess you haven’t read the other recent article.

    According to the information on this link, as of April 2011 it is illegal for a private Chinese company to exploit on “price adjustment buying”, meaning buying when NDRC sets price at its “low” and hoarding it (presumably in storage tanks) until price goes up.

    “six, price departments at all levels should strengthen supervision and inspection of oil prices, CRACK DOWN ON THE OCCASION OF THE USE OF PRICE ADJUSTMENT BUYING, hoarding behavior against spreading rumors, disturbing the market price of the order, and maintain oil market stability.”

    I wonder if these rules would affect LPH’s business.

    http://chinahourly.com/bizchina/201202/106988.html


    IMO

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    • That restriction relates to retail prices what was once explained by LPH.

      Moreover LPH purchased its inventory well before the decision on the price hike was made.

      It is normal situation - last price increase was 2 month ago and LPH also said it will benefit on this.

      • 1 Reply to marek602
      • “Second, gasoline and diesel wholesale prices equal the highest increase. Contract by the supplier to the retail and distribution enterprises, the maximum wholesale price at the maximum retail price to determine the upside down 300 yuan; the contract is not agreed upon distribution, the maximum wholesale price of not less than 335 yuan Flip determined. When the market retail price is lowered, the wholesale price should be reduced accordingly to maintain wholesale and retail price difference is not less than $ 300. Refined oil wholesale enterprises can not exceed the maximum wholesale price of the premise, in consultation with retailers to identify specific wholesale prices.

        Third, meet the qualifications of private companies supply the highest wholesale price, the highest deduction of 400 yuan to determine the retail price, retail prices when the market decreases, the supply of private wholesale enterprises price should be reduced accordingly to maintain spread is not less than $ 400. Specific supply price can not exceed the maximum supply price under the premise of consultation by both parties.

        Six, price departments at all levels should strengthen supervision and inspection of oil prices, CRACK DOWN ON THE OCCASION OF THE USE OF PRICE ADJUSTMENT BUYING, hoarding behavior”

        If you read the report carefully this is not just pertaining to retail pricing only. What is interesting is that “priced adjustment buying” applies to all sides (wholesale and retail). There seems to be a legal implication for wholesalers whose profit margins are greater than what the government allows. It sounds like the price movements between refineries, wholesalers, and retailers are kept in sync and always in tandem. So, how would these rules affect wholesale distributor’s profit margins?

 
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