SINGAPORE, Jan 8 Reuters China39;s fuel oil imports are expected to drop in early 2025 following a hike in the product39;s import tax from Jan. 1, prompting some sellers to lower prices to boost demand, several trade sources familiar with the matter said.

The rise in import duties, which comes on top of a separate policy last October to reduce tax rebates on fuel oil shipments, will further crimp margins for China39;s refining sector that has been reeling from lacklustre margins since last year.

Smaller refineries, especially those without or are short of crude oil import quotas, source for fuel oil as a feedstock to produce highervalue transportation fuels.

A slowdown in China39;s imports is expected to weigh further on fuel oil benchmark prices in the region, which have softened since last quarter due to ample supplies.

In late 2024, Beijing adjusted import tariffs for some commodities, with the rate for fuel oil rising to 3 from 1 from Jan. 1.

Under the new rule effective Jan. 1, the government also removed the customs code for other fuel oil and other heavy oil, a change traders said could help curb mislabelling of crude oil as residue fuel that bypasses the quota restrictions.

We expect to see some signs of slowing demand in the short term, said a fuel oil trader who sells cargoes to China.

The sources did not want to be identified due to trade sensitivities.

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