Bitumen trading: Sizing up the future

Author Keyvan Hedvat, Editor

When international oil trading firm Vitol’s bitumen unit Valt recently managed to complete the sale of the two smallest tankers in its specialised bitumen fleet, it underlined a gradual shift in the market to larger vessels.

Vitol’s bitumen trading, storage and transportation arm Valt had been looking for buyers for its 6,725 deadweight tonne (dwt) Asphalt Spring and 6,854 dwt Asphalt Summer tankers since early last year. It recently completed their sale to Dubai-based Prime Tankers and to Sharjah-based bitumen trading and supply firm Richmond Group, respectively, with the vessels renamed Global King I and Asphalt Express by their new owners.

The twin sale – understood but not confirmed to have been at no higher than $3.5mn/tanker — is the latest in a series of efforts by shipowners to offload smaller bitumen tankers in a sub-sector facing oversupply and intense competition.

Fundamental changes in the refining sector in recent years, brought to a head by the approaching IMO 2020 sulphur cap on marine fuels, have led to the closure of bitumen units and of refineries with significant output of the road paving product. This has led to a greater concentration of production at fewer refining locations, accompanied by the installation of cargo terminals to facilitate longer-haul and larger cargo movements across the globe.

Even bitumen, traditionally moved mainly by road tankers to inland markets — especially in Europe, where the remainder was shipped within areas such as the Mediterranean and Scandinavia in 3,000-8,000 dwt tankers — has succumbed to globalisation. In the process, major international trading firms such as Vitol and Trafigura have increased their presence in the market, operating larger state-of-the-art vessels, a process facilitated by a move to bigger terminals that can cope with loading and discharging larger cargoes.

Valt’s search for buyers to take the Asphalt Spring and Asphalt Summer off its hands began soon after it bolstered its fleet with the 36,950 dwt Asphalt Synergy, the second of two new-build vessels delivered to the firm by a Chinese shipyard following the 36,962 dwt Asphalt Splendor, which was launched in 2015.

Big boys

Trafigura unit Puma Energy has also been cultivating its global presence in the bitumen market, building or buying and then expanding bitumen terminals in the UK, Spain, Nigeria, Angola and Malaysia over the past few years. It also focused its bitumen shipping activities on medium-sized tankers of around 15,000 dwt and larger ones of around 30,000 dwt.

Trafigura and Vitol announced their presence in the Mediterranean market two years ago, when they began to successfully compete for import tenders issued by Egyptian state-run firm EGPC, which was switching away from its previous pattern of importing standard 4,000-7,000t cargoes supplied by firms such as BB Energy, alongside a host of independent bitumen trading companies.

EGPC has sought to return to more diverse cargo sizes, awarding two separate third-quarter tenders — one of them to Trafigura and Vitol specifying 15,000-30,000t cargoes for delivery to Alexandria, and the other to Italian trading firm Bitubulk and Egyptian trading and supply firm Imex that secured supply of 16 cargoes of  4,000-7,000t. EGPC tenders for late October and the second half of November have followed the same pattern.

This partial switch back to smaller cargo sizes, as well as the emergence of previous net importer Turkey as a major net exporter of bitumen this year, has been among factors lending some support to the traditional 5,000 dwt end of the Mediterranean market. But Turkey, and especially leading domestic refiner Tupras, have also bolstered the large cargo market and the vessels that support it, with large cargoes being loaded regularly at Aliaga this year in parallel with numerous smaller ones at Izmit and the BB Energy terminal at Mersin.

Mideast Gulf destinations such as Qatar, as well as Asia-Pacific outlets such as the Tanjung Langsat terminal in Malaysia, have become regular destinations for Turkish, Greek and other Mediterranean cargoes this year, adding to the usual larger cargo arbitrage flows from northwest Europe and the Mediterranean region to the Americas and west Africa.

Sales push

While there’s still room for smaller cargo movements and the tankers that ship them, both within the Mediterranean region but also to west African terminals with shallower draughts, oversupply and more intense competition in that tanker sub-sector has kept a firm lid on freight rates, squeezed operating margins and led to numerous efforts to offload vessels. But only some of these sales have been successful. The 7,197 dwt Lagan was finally sold earlier this summer, a year after being put on the market, with the sale of the 6,033 dwt Janesia Asphalt 6 by its Japanese owners going through at around the same time. In both cases, the sales were understood to be in the $4mn-4.5mn range.

Switzerland-based shipping firm ABC Maritime sold the 4,500 dwt San Benjamino in late 2016 to Mediterranean oil trading firm BB Energy, and the 4,400 dwt new-build tanker San Bertoldo in 2018, but was unable to find any takers at acceptable prices for the 4,995 dwt San Benedetto II for about a year. The vessel has been under time charter with Ivory Coast bitumen producer SMB since earlier this summer. 

Other bitumen tankers remain on sale and are struggling to find buyers. One 1997-built, 5,000 dwt tanker plying Mediterranean and west African routes is on that list. Its owner is understood to have sought $4mn-4.5mn for the vessel for the past year or two. Its current realistic sales value is put at just $2mn-2.5mn.

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