19 June 2012 08:32 [Source: ICIS news]
SINGAPORE (ICIS)--China’s domestic bitumen prices are expected to drop further because of the bearish sentiment of traders and persistently low consumption of end-users, market participants said on Tuesday.
The traditional weak demand season for bitumen begins in May each year and lasts until August, because of the arrival of the monsoon season when most road construction projects are suspended.
Bitumen, also known as asphalt, is used in road construction and paving as well as in the water proofing of homes and industrial buildings.
Many traders said they have stopped making purchases as they expect major producers PetroChina and Sinopec to announce price reductions of yuan (CNY) 100/tonne ($16/tonne) and above in the next one to two weeks.
Furthermore, market participants said Chinese bitumen is currently overvalued as compared with crude, fuel oil and imported bitumen prices.
Domestic bitumen was largely traded at CNY4,750-4,800/tonne while the average price of 180cst fuel oil, which is a substitute for bitumen, was at CNY4,615/tonne on 18 June, according to data from C1 Energy, an ICIS service in China.
In comparison, the prices of imported bitumen are CNY50-100/tonne higher than those of domestic cargoes, C1 Energy data showed.
The price gap between imported and domestic bitumen is typically CNY200/tonne, so that has reinforced market participants’ opinion that domestic bitumen is overvalued and further weakened their demand for local cargoes.
The domestic demand for bitumen is expected to remain weak for the two coming months as a result, a trader in east China said.
Traders are likely to only be interested in purchasing domestic cargoes if prices were to drop to CNY4,500-4,600/tonne, he added.
($1 = CNY6.36)
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