CHINESE OIL FIRM SEEKS DEPOSITS FROM DELINQUENT PRODUCT IMPORTERS

CHINESE OIL FIRM SEEKS DEPOSITS FROM DELINQUENT PRODUCT IMPORTERS

China National Chemicals Import & Export Corp. is requiring many customers to post a deposit on oil-product import orders, company and industry officials said.

The move arises from payment problems that have hit Western firms selling into the booming Chinese market, they said.Crude imports will not be affected.

Sources at Sinochem, as the state-owned Chinese firm is known, confirmed the procedure. They said the deposit was equivalent to 20 percent of the value of purchases on the entire range of products on a delivered basis. It can be paid in either yuan or U.S. dollars.

"Every time our customers delay payments, Sinochem has to service interest payments to suppliers," said a Sinochem source here. "The other state oil firms are not involved. It's a company policy, not the state's."

Spokesmen for the other state firms - China International United Petrochemicals Co. (Unipec) and China National United Oil Corp. (Chinaoil) - said from Beijing that they had no immediate intention to require deposits.

Sinochem sources say the deposit is necessary to protect the company from payment delays that are becoming common in oil trading. Sources in Beijing were reluctant to disclose the amounts involved, but one said they were ''significant enough to cause the action."

"Those customers which have a good reputation and have not had a bad record in their payments will not be required to give this deposit," the Singapore company source said.

Chinese sources said the new rule would result in a drop in Sinochem's imports in line with a fall in customers' requests.

"But this will be offset by a rise in requests through other channels who don't require the deposit," a Chinese trader said.

Western oil firms hit by payment delays from Chinese importers, mainly for diesel, are being forced to stop sales to China until the debt is cleared or at least reduced.

"The payment delays amount to millions of dollars. For some of us, it's not just diesel sales, but products across the barrel," a Singapore-based Western trader said.

Scarcity of hard currency in China is causing the payment delays, Chinese sources said.