FocusChina bitumen may extend slide on delays in road projects

07 June 2012 04:35  [Source: ICIS news]

By Jessie Yang

SINGAPORE (ICIS)--Bitumen prices in the Chinese market look set to continue falling, with road projects being delayed by funding constraints amid a domestic credit crunch, as well as by an onset of the rainy season in the southern regions, industry sources said on Thursday.

Bitumen prices in the Chinese market fell below yuan (CNY) 5,000/tonne ($786/tonne) in June trades, in line with sharp falls in crude futures and poor downstream demand. Prices have shed 5-6% from a month ago, with AH-70/90 bitumen traded at CNY4,750-4,850/tonne on 6 June, market sources said.

Concerns about global demand following release of poor economic data from the US and China – the world’s top energy consumers – compounded by the eurozone debt crisis, saw crude prices slumping in the international markets.

Duri crude has declined by $18.95/bbl, or by 16%, since early May, to close at $101.26/bbl on 6 June, according to data from C1 Energy, an ICIS service in China.

Access to capital has remained tight in China despite the three cuts in the banks’ reserve requirements since December last year, industry sources said.

Henan province has a plan to open 804 kilometres (km) of road to traffic this year, but it has yet to issue buying tenders for bitumen owing to capital shortage, traders said.

There were initial hopes that the Chinese authorities would further ease the country’s monetary policy to boost the world’s second biggest economy, which is showing definite signs of slowing down.

Increased supply of bitumen is also depressing prices, with diminishing demand for low-sulphur material that usually goes into production of coke gas oil and gasoline, industry sources said.

C1 data showed that only 4% of China’s bitumen output of 1.15-1.2m tonnes in May was used as coke feedstocks. In the first quarter of the year, coke feedstock use accounted for 20% or a fifth of the country’s total bitumen production during the period.

($1 = CNY6.36 / $1 = €0.80)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Jessie Yang

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