FocusChinese bitumen hits new high on restocking, increased costs

15 February 2012 06:30  [Source: ICIS news]

By Alfa Li

SINGAPORE (ICIS)--China’s bitumen prices have risen to new highs because of active restocking and higher production costs, but strengthening demand may lead to a bullish market, market sources said on Wednesday.

South China-based traders are expecting the prices to break the yuan (CNY) 5,000/tonne ($794/tonne) level in the next two months.

The prices of heavy-duty paving bitumen in south China reached CNY4,700-4,800/tonne on 12 February, surpassing the previous record at CNY4,600-4,650/tonne set in mid-2011, according to C1 Energy, an ICIS service in China. The country’s domestic bitumen prices are stable this week.

The import prices of bitumen from South Korea, Singapore, Taiwan and Thailand on FOB (free on board) and CFR (cost & freight) China basis have reached new highs. Singaporean bitumen was traded at $640/tonne (€490/tonne) FOB on 12 February, C1 Energy’s data showed.

Restocking demand in China increased rapidly after the Lunar New Year holiday in late January. Traders have been stockpiling large volumes of bitumen from south China for road projects in the country’s central and southwest regions, market sources said.

“Traders started restocking after the Lunar New Year holiday because they supply bitumen to end-users at a fixed price as most of them are concerned that prices will rise further in the near term,” a south China-based trader said.

“The demand in Sichuan, Jiangxi and Hunan provinces is high this year,” the trader added.

The increase in production costs is another reason for the price hike.

Duri crude was priced at $118.07/bbl on 13 February, up by $8.16/bbl or 7.42% from 20 January. Singaporean 180cst fuel oil prices stayed at above $700/tonne during the same period, with a peak of $740/tonne on 13 February, according to C1 Energy data.

However, traders with ample inventories may start destocking to pocket profits if the prices continue increasing, a second south China trader said.

“We previously forecasted that the prices will continue increasing until late April, but historic highs have already been reached,” a source with an east China-based producer said.

The source added that “price adjustments may happen in March-April if the current bullish trend continues”.

In Asia, high feedstock costs and tight supply continue to cause Singapore and South Korea bitumen prices to firm this week. In Singapore, the highest FOB quotation increased to $650/tonne, which is $5/tonne higher than last week.

However, the demand from China, Indonesia and Vietnam is largely weak, leading traders to predict that buyers will resist higher offers.

“I heard a producer is asking traders of the prices they [buyers from southeast Asia] want, so they may have trouble selling March cargoes,” a Singaporean trader said.

On 10 February, South Korea’s SK Energy offered March cargoes at about $630/tonne FOB, $20/tonne higher than its February cargoes. The company is the first producer to offer March bitumen cargoes in South Korea.

($1 = CNY6.30, $1 = €0.76)

By: Alfa Li
020-3762 0271

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