FocusEast China bitumen supply tightens in March on low production

07 March 2012 06:03  [Source: ICIS news]

By Psyche Gong

SINGAPORE (ICIS)--Bitumen supply in east China is expected to remain tight and prices are likely to edge higher this month on the back of low production and increasing demand from blenders, industry sources said on Wednesday.

Squeezed by spikes in crude feedstock cost, mainstream local producers are reducing bitumen output and switching to produce other products like fuel oil that brings better margins, they said.

The price of Duri crude, a reference in calculating bitumen producers’ feedstock cost, has increased from $112.51/bbl at the beginning of 2012 to $128.07/bbl on 6 March, up by 13.8%, according to C1 Energy data, an ICIS service in China.

The strong crude prices have battered bitumen margins as low as yuan (CNY) 26/tonne (€4/tonne) in late February from CNY248/tonne in early January, C1 Energy data showed.

“We may get resistance from buyers if we push prices too fast, so only thing we can to is to cut production,” a source from PetroChina Fuel Oil Co said.

The tight supply has sent up bitumen prices in east China to CNY4,950-5,000/tonne on 6 March, up by 6.4% from CNY4,650-4,700/tonne in early February, according to C1 Energy.

Market sources are predicting further price rise in coming weeks as production fails to catch up with demand.  

“Price may continue to rise since supply is getting even tighter in March, on the other hand some roads will start getting paved,” a trader said.

March production in the east region will be about 394,000 tonnes in total, but around 11,000 tonnes or 28% will be used in blending coking feedstock, leaving the remainder insufficient to satisfy rising demand from end users in road-paving, market sources said.

China opened about 6,857km (4,261 miles) of new expressways in 2011, representing 72% of the planned expressway length and the country expects to open even more roads in 2012.

Sinopec has cut bitumen output from its Zhenhai and Jinling plants by 20% from February to 90,000 tonnes and 40,000 tonnes respectively in March, traders said citing company’s effort to minimize losses and support the prices.

Similarly for the same reasons PetroChina has trimmed bitumen production from its Wenzhou plant to 45,000 tonnes in March, falling by 6.25% from February, according to a company source.

PetroChina’s Jiangyin plant will also produce 50% less bitumen in March against February’s 48,000 tonnes, the source added.


By: Psyche Gong
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