OREANDA-NEWS. October 12, 2012. The price of China’s ex-refinery jet fuel for October is expected to average RMB 7,923 (USD 1,257) per ton, up RMB 391 (USD 62) or 5.1 percent from September, oil analyst Dong Lizhu told Interfax.

Dong said the average price will be hiked even though international crude prices have fallen because the FOB price of Singapore jet fuel, a key benchmark, rose in September on strong regional demand. West Texas Intermediate is down 4.7 percent since the end of July.

Steady demand in China ahead of the week-long holiday at the start of October helped keep the margins on Asian jet fuel above USD 20 a barrel, according to Reuters.

The ex-refinery price is based on the post-tax CIF (cost, insurance and freight) price and includes the discounts for the jet fuel supplied by PetroChina Ltd., China Petroleum & Chemical Corp. (Sinopec Group) and CNOOC Ltd. to China National Aviation Fuel Group Corp., the country's near-monopoly marketer of aviation fuel.

China calculates the monthly post-tax CIF price by adding the FOB price of Singapore jet fuel to transportation costs, customs duties, value-added tax and port charges. The average price of Singapore jet fuel climbed approximately USD 7 per barrel month-on-month in September.

The National Development and Reform Commission (NDRC), China’s state economic planner, is expected to set the post-tax CIF price for jet fuel in September at RMB 7,973 (USD 1,266) per ton, up RMB 391 (USD 62) from September, said Dong.

Shanghai and Hong Kong Stock Exchange-listed Air China. Ltd., China Eastern Airlines Corp. Ltd. and China Southern Airlines Ltd. will see their margins slashed further as a result of the new hike. Air China said high fuel costs were partly responsible for the carrier’s 73.9 percent year-on-year slump in net profit in the first half of 2012.

Domestic airlines are expected to raise fuel surcharges by RMB 10 (USD 1.58) per person as soon as possible, noted Dong, which would be the third increase this year following hikes in April and September. The current fuel surcharge for routes of up to 800 kilometers (km) is RMB 70 (USD 9.58) per person and RMB 130 (USD 20.63) per person for routes of 800 km and longer.

Carriers are only permitted to raise domestic surcharges if fuel prices increase by RMB 250 (USD 40) per ton or more, according to pricing policy set by the NDRC.

Plane builders and refiners are using high jet fuel prices as an opportunity to develop alternative fuels for the aviation industry to reduce costs and curb emissions.

Airbus SA on Tuesday said it is working with Sinopec Group to develop and promote renewable aviation fuel production for regular commercial use in China. The certified fuel will be produced by Sinopec Group in a newly built refinery in Hangzhou.

Boeing Co. and state-owned Commercial Aircraft Corp. of China on Aug. 16 opened a new research facility in Beijing to explore opportunities to refine waste cooking oil into sustainable aviation biofuel.