08 May 2012 12:32 [Source: ICIS news]
SINGAPORE (ICIS)--International buyers are increasingly putting up resistance to June offers for Singapore-origin bitumen because they said those cargoes are overpriced considering the prevailing fuel oil prices, traders said on Tuesday.
Bitumen is considered to be at a “fair value” when it is priced at around 85% of fuel oil prices, market sources said.
However, the ratio has risen to as high as 92% this year.
Singaporean refiners are offering June bitumen cargoes at $660-670/tonne (€508-516/tonne) FOB (free on board), which is much higher than what market players deem “fair value”.
Market players said $586/tonne would be “fair value” as 180cSt fuel oil prices were at $690/tonne on 7 May, according to data from C1 Energy, an ICIS service in China.
Singapore-origin bitumen prices were at $662.50/tonne FOB on 8 May, ICIS data showed.
“A refiner posted its bitumen offer at $660/tonne FOB, but we expected a lower price because fuel oil prices have fallen. China buyers can only accept $640-645/tonne maximum,” an international trader said.
As a result of the higher prices, Singapore refiners said they have sold only 8,000-10,000 tonnes of their June cargoes, including 6,000 tonnes of spot cargoes, as of 7 May.
This represents 12.5% of the country’s total export plan for June, according to C1 Energy data.
In addition, the demand from China, Australia and southeast Asia is weak, so the prices of Singapore-origin bitumen may drop significantly in the next 15 days if fuel oil prices remain at their current level or even decline, market sources said.
Bitumen refiners said they are keeping their offers firm as their production costs are high and it is still early in the month.
However, a Singaporean trader said: “Refiners are closely watching the market. Any price reduction [by a refiner] will be followed immediately by competitors.”
($1 = €0.77)
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