China bitumen nears CNY5,000/tonne on strong demand, tight supply

27 February 2012 10:22  [Source: ICIS news]

SINGAPORE (ICIS)--China’s domestic bitumen prices increased to as much as yuan (CNY) 4,950/tonne ($788/tonne) on Monday, just CNY50/tonne shy of hitting CNY5,000/tonne on the back of strong demand and high crude prices, market sources said.

In east China, spot deals were concluded at CNY4,850-4,950/tonne ($770-786/tonne) on Monday, representing a CNY350/tonne increase or an 8% rise from the start of the year, market sources said.

In north China, deals on Monday were priced at CNY4,750-4,900/tonne, up by CNY525/tonne or 12% over the same period.

Demand from the coking feedstock blending market has been driving up bitumen prices.

The sector used up more than 20% of the 1.21m tones of China’s bitumen output in January, while it is expected to take up 15% of the February output, according to C1 Energy.

Spiking crude prices in the domestic market have also been pushing up bitumen prices in China. Prices of Duri crude, a kind of heavy-duty oil, increased 13% from the start of 2012 to $124/bbl. Chinese refineries use the Duri crude prices as reference for their products.

Prices of domestic bitumen in China may continue rising strongly in March, with supply expected to remain tight because of planned maintenance at production facilities, market players said.

In Shandong province, almost all bitumen producers, with the exception of Sinopec Qilu Petrochemical, have switched to production of residue – fuel oil that can be used to produce gasoline and diesel – that generates better margins than bitumen, traders said.

We prefer to produce residue as long as its price is better than bitumen’s,” a Shandong-based refiner said.

Shandong, a province in eastern China, produced less than 60,000 tonnes of bitumen in January and is expected to produce about the same low volume in February, market sources said. Its actual bitumen production is barely half the usual monthly output of 150,000-200,000 tonnes.

($1 = CNY6.30)

By: Jessie Yang

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