FocusChinese bitumen to firm further on tight supply, high demand

03 February 2012 04:39  [Source: ICIS news]

By Psyche Gong and Alfa Li

SINGAPORE (ICIS)--China’s bitumen prices are expected to rise further in the coming weeks because of tight supply and strong demand, particularly for the country’s increasing number of road projects, traders said on Friday.

Bitumen supply for road projects is especially tight in northeast China and Shandong province on the country’s eastern coast because many independent refineries in the two regions are purchasing more of the product as feedstock, according to a source from a local refinery.

This is because it is cheaper than other types of feedstock, such as residue residue for fuel oil, market sources said.

In addition, some bunker fuel suppliers are buying more bitumen as blending stock to be made into fuel.

The prices have been rising since late January because of active restocking and bullish buying sentiment on firmer crude prices, industry sources said.

The monthly average FOB (free on board) prices of crude from Indonesia’s Duri oilfield were at $109.31/bbl , by $4.22/bbl on 1 February or 4.01% compared to those in December 2011.

On 1 February, domestic heavy-duty paving bitumen was traded at yuan (CNY) 4,600-4,700/tonne ($729-745/tonne) ex-works in eastern China and CNY4,500-4,550/tonne in southern China, according to data from C1 Energy, an ICIS service in China.

The prices are up by CNY150/tonne and CNY50/tonne, respectively, from the prices on 22 January, the data showed.

The prices were at CNY4,650-4,700/tonne ex-works in northern parts of the country on 1 February, a rise of CNY300/tonne from 22 January, the data showed.

Most traders have started to replenish their inventories after the Lunar New Year holiday, which ended on 28 January, as they are expecting the prices to rise further, the sources said.

However, some traders are cautious on restocking, saying the current prices are too high.

“The price rise is primarily caused by a cost increase and most traders are still experiencing funding difficulties,” a Jiangsu-based trader said.

“It is risky to stockpile before identifying buyers,” the trader added.

In addition, the prices of bitumen in South Korea are increasing on higher raw material crude costs.

South Korean bitumen for delivery in February are being traded at $600-610/tonne (€456-464/tonne) FOB (free on board), hitting historical highs compared with $585-590/tonne FOB for January cargoes, according to the C1 Energy data.

This is equivalent to CNY5,000/tonne CFR (cost & freight) east China, inclusive of tax, the data showed.

Demand from China remains stable despite the higher bitumen prices in South Korea.

S-Oil offered at $640/tonne CFR east China and at least three importers from Jiangsu and Shandong provinces are interested in purchasing February cargoes from the major producer.

“Importers may become [more eager] when China’s domestic prices increase twice during February,” a Jiangsu importer said.

Oil major SK Energy was said to have offered at $635/tonne CFR east China for February spot cargoes on 1 February, which is an increase of $15/tonne from last week, an east China-based importer said [Source?].

SK Energy has resumed long-term contacts with China and two major importers have signed long-term contacts at $650-655/tonne CFR east China for cargoes delivered in the first half of 2012, one of the agents said.

($1 = CNY6.31, $1 = €0.76)

By: Psyche Gong & Alfa Li
+65 6780 4359

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