OUTLOOK ’12: China bitumen demand to rebound as credit eases

30 December 2011 05:09  [Source: ICIS news]

By Alfa Li

SINGAPORE (ICIS)--China’s demand for bitumen will rebound in 2012, following an expected drop this year, as road-building activities pick up with the expected easing of tight access to credit, industry sources said.

Demand in 2012 is expected to grow by 1.95% to 19.32m tonnes, a reversal of a projected 5.8% decline in demand this year to 18.95m tonnes, according to C1 Energy, an ICIS service in China.

Funding for road projects will be more guaranteed, unlike this year, when China maintained its monetary tightening for the most part of the year, squeezing dry the funds for major infrastructure developments, industry sources said.

C1 Energy estimates that domestic production of bitumen in 2011 is estimated to hit 15.7m tonnes, representing a 2.85% decline from 2010 levels.

The bulk of the demand in 2012 will be covered by domestic production, while about 3.5m tonnes of bitumen will be imported, down by 14.4% from last year given the smaller volumes imported from South Korea.

Exports would total 250,000 tonnes for the year, down by 66.7% as compared with 2010 levels, according to C1 Energy data.

China’s 12th five-year plan started this year, in which the country set out its goals through 2016. There is a tendency for road projects to be slow in the first two years of the plan’s implementation.

In the first 10 months of 2011, China bitumen consumption stood at 16m tonnes, down by 5% year on year, according to C1 Energy.

China is expected to open to traffic only 6,857km (4,261 miles) of new expressways in 2011. That represents 72% of the planned expressway length, based on official statistics.

Those projects that were held back by tight access to credit this year will likely push through in 2012, given strong expectations that China will revert to a more loose monetary policy as its economy has shown clear signs of slowing down.

The Chinese government is expected to carefully calibrate its monetary and fiscal policies to ensure economic growth remains stable at the high single-digit levels, while the industrial economies in the West slow down.

It took the first step when it reduced the banks’ reserve requirement ratio by 50 basis points in early December.

China’s production capacity for bitumen is expected to reach 25.25m tonnes in 2011, up a normalised rate of 4.1% year on year after an 18% expansion in 2010, according to C1 Energy data.

About a fifth of China’s bitumen consumption goes into making polymer modified bitumen, the demand for which is expected to be 5.7% lower this year as compared with 2010 levels.

To date, China’s domestic bitumen prices have gone up by about 14% to yuan (CNY) 4,600/tonne ($728/tonne), according to C1 Energy.

Prices usually rise in May-October, when road construction activities peak.

($1 = CNY6.32)

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By: Alfa Li
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