Coronavirus has affected commodity markets across the globe, and bitumen is no exception. Tune in to this latest podcast to learn how the pandemic has impacted bitumen markets in Europe and Africa.
Listen in as Keyvan Hedvat, Editor for European & African Bitumen, and Alfonso Berrocal, Business Development Manager for Specialities, discuss the impact of coronavirus on bitumen in Europe, Africa and beyond.
Transcript
Keyvan: Today's podcast is brought to you by Argus Media, a leading independent provider of energy and commodity pricing information. The coronavirus has affected commodity markets across the globe, and bitumen is no exception. I'm Keyvan Hedvat, Bitumen editor for European and African markets at Argus. And with me is Alfonso Berrocal, business development manager for Specialities Europe. Stay tuned and as we discuss the coronavirus impact on European bitumen markets. As we entered 2020, we thought it was going to be largely about supply. How would the IMO 2020 sulphur cap on marine fuels impact oil markets, refinery operations, crude slates, and bitumen production and supply? What this year has turned out to be about is COVID-19 and the extent to which this pandemic is hitting and, in some cases, crushing demand and prices.
Alfonso: Hi, Keyvan, and hello to everyone. This is Alfonso. Thank you for that intro. Keyvan, COVID lockdowns, we've seen a dramatic impact in the demand of crude and refined products in Europe, particularly in products like gasoline or jet. What would you say that it has been the impact on bitumen demand across Europe. And do we see differences in demand between different trading areas, for instance, Baltics, Northwest Europe, Med? And what about difference between different countries' domestic demand?
Keyvan: To put it simply, it's been a disaster, although not in all markets and not uniformly by any means. Let's take the cargo markets first where the impact has been most pronounced, especially in the Mediterranean. We all know the disastrous COVID-19 impact on Italy and Spain where, aside from the tragedy, the construction activity and demand has collapsed, generating more surpluses for export. But what are the buyers? As each lockdown as imposed, more markets are closed off, in Algeria, in Morocco, in Tunisia, and also in Nigeria. All key export markets for Mediterranean, European cargoes. And those exporters, including in Greece, can't even rely on arbitragers anymore, especially the one to the westbound transatlantic routes to the U.S. and the Americas. Egypt has been a notable though unreliable exception to all this. And it's generated a reasonable amount of demand, although on an on and off basis as the tenders have been issued and then canceled.
Its refinery in Alexandria has been restarted and they're shut down again. But at least it's generated some demand on the Eastern Med as has Romania, where it's still receiving a number of cargoes into its Black Sea ports. In Romania, the construction is still continuing and bitumen flows are heading by ship and by truck. And this also points to some of the picture, the relatively positive picture in some of inland Europe. Other markets like that are Hungary, Germany, achieve the key markets, the key Northwest European markets and the Netherlands. And to a lesser extent, the UK and also Scandinavian and Nordic markets. On the other hand, France, Ireland, and Belgium have seen some of the most severe lockdown measures that have halted construction over recent few weeks. Although there are some positive signs in France and Belgium now, but even, and also in Spain, we've seen severe lockdown restrictions, which are now slowly being eased. So, maybe there's hope yet for bitumen that while markets like jets and gasoline remain in major lockdown, governments will seek to inject some life into construction and into their economies that could, in turn, lose bitumen demand. So, let's see how this all works out. Much will depend on the infamous coronavirus curve and the success of efforts to overcome it.
Alfonso: Okay, Keyvan. Thank you. Do we see differences in demand between different trading areas, for instance, Baltics, Northwest Europe or the Med? And what about differences between different countries' domestic demand?
Keyvan: Let's start again with the bad news. Let's look at the worst hit markets first. In Algeria, there's been a north-south divide where the northern half of the country has been in complete lockdown with construction work stopped for several weeks now. And in the south where projects have been going, because of the lockdown measures affecting movements of workers and materials, that has also begun to slow down there as well quite markedly. And what that has resulted in is the Algerian state refiner Sonatrach, which is the major importer of bitumen in the country into several terminals, has deferred a number of cargoes, that actually agreed on a tender basis or on a contractual basis, including two cargoes, two April cargoes that it was going to take from [inaudible 00:05:24.865], and a cargo each from Cepsa and from the Augusta Refinery in Sicily, which, of course, Sonatrach owns now.
In Morocco where private importers run a string of terminals, there's been little or no buying. They were very important parts, those Moroccan buyers, of the spot markets taking cargoes both on contracts and on spot. This year, they've actually not even agreed most of their contractual agreements, but now they're not even involved in the spot markets as the storage tanks fill up and construction companies don't come to pick up volumes because of lockdown measures that are affecting that sector. No one wants to take a punt on bitumen in the North African region, most of it, apart from Egypt. And, of course, as a result, prices keep going down and buyers just don't come forward to respond to the falling prices. This is the case across the board. And as I mentioned before, EGPC which has seen demand popping up including a 6-cargo requirement, which is currently being fulfilled, itself canceled a 10-cargo import tender in April, and it has a fairly erratic policy in terms of how it runs its refinery in Alexandria and how it issues import requirements and takes delivery.
So, that has been the picture, difficult picture for the Mediterranean, and it's not going to be made any easier by the fact that the Muslim fasting month of Ramadan is going to start in a couple of days' time. By contrast, there has been relative resilience in some of the Northwest European markets, which coupled with the refinery run cuts, especially in Germany, continued refinery holds most notably in France and maintenance shutdowns, like, at the Litvinov Refinery in the Czech Republic, and as Rompetrol's [inaudible 00:07:38.255] refinery in Romania means supply and demand is showing resemblance of returning to a new equilibrium, of course, at much lower volumes that has seen most domestic and inland export truck markets and prices stabilize, and in some cases, even begin to rise over the past week or so.
And that has meant, of course, that bitumen values are at huge premium, certainly on those inland truck markets are at huge premiums to crude and fuel oil prices. And once again, showing that disconnect that bitumen has shown for years from those markets. The UK and France have been, and most of all, Ireland, all of them important cargo input markets, for now, remain in the doldrums. And that leaves cargo supplies and Northwest Europe also struggling to find homes for some of their volumes, even if those inland markets are relatively good.
We'll see now, of course, what happens in France and, yeah, as the lockdown measures were eased on construction as was the case in Spain and see how that starts to improve activity and requirements from May onwards. So, that could be an important factor. So, let me now just turn back to you, Alfonso, and ask you, how do you gauge the impact of the coronavirus-related developments on bitumen prices and on its pricing, in particular, on cargo markets? Something which was already in a state of flux as IMO 2020 sulphur cap was taking effect.
Alfonso: Okay. Let's just split the answer between cargo and domestic markets. Since kind of a trading perspective, there are two building blocks when pricing bitumen in Europe. And both, they have experienced downward pressure price-wise. The main building block today is the underlying value of high sulphur fuel oil, which, it has been challenged since Q4 last year as IMO 2020 implementation has increased the volatility of the HSFO, and it has decreased dramatically its usage as banker in favor of very low sulphur fuel oil. This has raised concerns about the future liquidity of the HSFO swab [SP], and those concern are still in the back of the head of the market, although the reality is that demand of HSFO for cokers, particularly in the U.S., as well as cargoes flowing into the AG for power generation and an underlying lack of heavy sour crudes are supporting the HSFO crack and its trade. So market is still is using it with consequence that as the value of the crude has sunk from $60 a barrel to nearly $20, it has [inaudible 00:10:50.490] fit their flat price of the HSFO and, therefore, the flat price of the bitumen.
The second component in this is the supply-demand of bitumen itself. As many European and Northern African countries have entered into periods of lockdown, the amount for bitumen has vanished, particularly in the Med, putting further pressure on the flat price of the bitumen. For instance, if we look at the comparison between the price, between the 10th of January and the 10th of April, we can see that on the 10th of January, Argus [inaudible 00:11:33.168] values were at $320 a ton, where in the 10th of April Argus [inaudible 00:11:41.368] printed at $159 a ton, staggering 50% drop in value. If we look at the North market, if we look at the Rotterdam values between the 10th of January and the 10th of April, Rotterdam was trading at $363 a ton, and on the 10th of April ended up trading at $195 a ton, almost, as well, a 50% drop. Since domestic market perspective, the impact of the value of the HSFO and the brand is much softer, the cargo trading markets, because the supply-demand component of the bitumen has more weight than the cargo trading.
And there is another component, which is the Euro-U.S. dollar exchange rate that normally tends to soften the higher volatility of the brand and the HSFO. So if we look at this same period and compare Italy with Northern Germany, we can see that in the 10th of January, both Italy and Northern Germany markets that were selling X rock at 350 euros a ton, and in the 10th of April, Italy dropped by 33% at 235, and Germany dropped by 90% trading at €285 a ton. So, we can see two consequences on how COVID has impacted the prices. And one is that the domestic markets, they've been impacted much less than cargo trading markets. And if we look at regions, the impact clearly in Northern markets or countries like Germany has been much less than in countries like Italy. Now, if we want to look at the supply angle, I would like to ask you, what do we know about refinery run cuts and maintenance, and how this may impact or offset the lack of demand?
Keyvan: Well, of course, for a while as this crisis began to take hold in Europe in early to mid-March and as lockdown measures began to be imposed, refiners were able to react to the drop in oil products demand by filling up their tanks. But, of course, once these limits were reached, in many cases, there was no choice but to cut to refinery runs. And in some isolated cases so far, to shut refineries. The most obvious bitumen impacting example of that, of course, was upping decision to shut its Falconara Refinery in Italy in late March. We also know that ENI has been running its Italian refineries at about 60% of capacity. Cutbacks and crude intake and refinery runs have also affected Repsol refineries in Tarragona, A Coruña, and Bilbao, although there was no evidence yet of significant output cuts at the 1.2 million times a year, Repsol-Cepsa joint venture assessor, the joint ventures, bitumen-producing refinery in Tarragona, which has been fed with Albanian bitumen-rich Patos-Marinza crude.
Up in Northwest Europe, Shell's Turner's refinery, refinery maintenance shutdown was brought forward by several weeks to begin in mid-April following guidelines from the Dutch authorities to protect the health and well-being of staff amidst the coronavirus outbreak. In cases like these, as also seen affecting German refineries similarly hit by collapsing demand for motor fuels, bitumen production is, of course, also hit, whether intended or not. This is what we see. And on a landmark it's also, there have been run cuts at Szazhalombatta Refinery in Hungary and cutbacks have also affected them, this refinery, Pančevo, in Serbia. All those factors have also helped to tighten Central and Southeast European bitumen supply.
Alfonso: Okay, Keyvan. Thank you. And what about the freight market? Any insight about where the situation is driving ship owners other than driving them definitely mad?
Keyvan: Definitely. I think they have been [inaudible 00:16:09.966]. They're not the only ones, shipowners and traders alike, tearing their hair out. You know, I'm probably becoming as bold as I am, and thankfully no one can see that on here. But yeah, it's been a very tough time for ship owners and ship brokers trying to find business. It's been a roller coaster ride, really, for freight markets over the past year or so. We've gone from a massive oversupply of bitumen tanker tonnage about a year or so ago to a dramatic tightening and sharpy rising freight rates in the first two months of this year in part caused by the rising bunker cost to do with IMO 2020 and by strong spot demand in the Med, for example, as pricing concerns or ideas which way to price bitumen led many buyers to just not agree contractual term deals, etc., and instead, to buy on a spot basis.
And then came COVID-19, which has put a stop to spot requirements and left numerous ships lying idle, unemployed, with shipowners and ship brokers not knowing what to do. The impact of that, of course, has been a slump in freight rates. For example, on the Augusta Mohammed DIA route, with the Sicily to Muhammad DIA and Morocco, rates increased to as much as around $55 a ton at the beginning of March. Now they're back to about $35 to $40 a ton. There was one particular case of a reference to even as low as freight of $35 to $40 a ton, even, from Greece to Morocco, and that compared to a peak of about $70 a ton on that kind of route, well, in February. And even then, no buyer was found in Morocco to take on a delivered basis. But we've seen, yeah, ships just not having any homes and no business.
And on top of that, not just on the spot market, but on the term market, the time charters, that has also gone quiet with some companies like Sonatrach Shipping [inaudible 00:18:29.822], which had been looking for a tanker on time charter, as well as ENI, the Italian firm. These firms have been looking at the market for time charter vessels, but they've withdrew from that. And even there was very little demand. So, it's a market in distress. So, Alfonso, I'd like to turn to try to look ahead, one would help to better times. How do you see the bitumen market and price outlook for the rest of this quarter, and especially in the third quarter and into October, November, when the consuming season in many markets draws to a close?
Alfonso: Well, it seems that the prices could be more supported in Northern European countries than in the Med during Q2. We see that countries like Germany or France are already consuming, whether the demand in Italy and Spain with star signaling during Q2, but it will still be damaged because the stocks need to be depleted further. We need as well to consider that Ramadan starts by the end of April and North Africa is stocked.
These may drag the buying interest towards June and Q3. In terms of prices where it may happen is that further discounts from suppliers will not entice buyers in any case. So, we could phrase a relative stagnation price-wise. And these will all always be subject that the crude markets behave relatively normal. If, obviously, they behave like yesterday when the W2I closed at discounts at negative levels that is distributed if it goes to be hard to understand where the flat price of the bitumen will be. But if we put on the side these anomalies and we look at Q3 and if they will manage to feel relatively comfortable coexisting with COVID-19, then once the stocks are more depleted, we could see an increase on demand and a recovery price. Question is, is the market going to recover fully by Q3 and will we have a proper summer season?
Well, I don't think we should expect the fully recovery. We need to consider as well that the summer season pattern has been extending and displacing towards October, November in the last years. So, if this pattern persists, I think Q4 maybe better than Q3 in terms of demand and price support. In the long-term picture, I think we need to consider the consequences that it may have, the governments' budgets, which they may be cut as they are allocating funds during 2020 in order to cope with COVID-19, we could see a delayed effect in the crisis of 2009 in the bitumen market. Although this crisis is completely different and the recovery should be...is not a credit problem, so the recovery may be and should be faster.
Keyvan: Thank you, Alfonso. Thank you very much. And I think we've laid out some of the issues, some of the patterns, and some of the possible developments in this very uncertain world that we live in and the pricing too. Thank you, of course, for tuning in to our "Argus" podcast. If you're interested in reading more news stories about the impacts of the coronavirus outbreak on the world economy and commodity markets, please log on to the Argus Coronavirus hub, www.argusmedia.com/coronavirus.
Alfonso: Thank you, Keyvan. And if you are interested in a trial copy of the Argus Bitumen Report, please go to www.argusmedia.com/oilproducts/argusbitumen. Thank you very much.
Alfonso: Hi, Keyvan, and hello to everyone. This is Alfonso. Thank you for that intro. Keyvan, COVID lockdowns, we've seen a dramatic impact in the demand of crude and refined products in Europe, particularly in products like gasoline or jet. What would you say that it has been the impact on bitumen demand across Europe. And do we see differences in demand between different trading areas, for instance, Baltics, Northwest Europe, Med? And what about difference between different countries' domestic demand?
Keyvan: To put it simply, it's been a disaster, although not in all markets and not uniformly by any means. Let's take the cargo markets first where the impact has been most pronounced, especially in the Mediterranean. We all know the disastrous COVID-19 impact on Italy and Spain where, aside from the tragedy, the construction activity and demand has collapsed, generating more surpluses for export. But what are the buyers? As each lockdown as imposed, more markets are closed off, in Algeria, in Morocco, in Tunisia, and also in Nigeria. All key export markets for Mediterranean, European cargoes. And those exporters, including in Greece, can't even rely on arbitragers anymore, especially the one to the westbound transatlantic routes to the U.S. and the Americas. Egypt has been a notable though unreliable exception to all this. And it's generated a reasonable amount of demand, although on an on and off basis as the tenders have been issued and then canceled.
Its refinery in Alexandria has been restarted and they're shut down again. But at least it's generated some demand on the Eastern Med as has Romania, where it's still receiving a number of cargoes into its Black Sea ports. In Romania, the construction is still continuing and bitumen flows are heading by ship and by truck. And this also points to some of the picture, the relatively positive picture in some of inland Europe. Other markets like that are Hungary, Germany, achieve the key markets, the key Northwest European markets and the Netherlands. And to a lesser extent, the UK and also Scandinavian and Nordic markets. On the other hand, France, Ireland, and Belgium have seen some of the most severe lockdown measures that have halted construction over recent few weeks. Although there are some positive signs in France and Belgium now, but even, and also in Spain, we've seen severe lockdown restrictions, which are now slowly being eased. So, maybe there's hope yet for bitumen that while markets like jets and gasoline remain in major lockdown, governments will seek to inject some life into construction and into their economies that could, in turn, lose bitumen demand. So, let's see how this all works out. Much will depend on the infamous coronavirus curve and the success of efforts to overcome it.
Alfonso: Okay, Keyvan. Thank you. Do we see differences in demand between different trading areas, for instance, Baltics, Northwest Europe or the Med? And what about differences between different countries' domestic demand?
Keyvan: Let's start again with the bad news. Let's look at the worst hit markets first. In Algeria, there's been a north-south divide where the northern half of the country has been in complete lockdown with construction work stopped for several weeks now. And in the south where projects have been going, because of the lockdown measures affecting movements of workers and materials, that has also begun to slow down there as well quite markedly. And what that has resulted in is the Algerian state refiner Sonatrach, which is the major importer of bitumen in the country into several terminals, has deferred a number of cargoes, that actually agreed on a tender basis or on a contractual basis, including two cargoes, two April cargoes that it was going to take from [inaudible 00:05:24.865], and a cargo each from Cepsa and from the Augusta Refinery in Sicily, which, of course, Sonatrach owns now.
In Morocco where private importers run a string of terminals, there's been little or no buying. They were very important parts, those Moroccan buyers, of the spot markets taking cargoes both on contracts and on spot. This year, they've actually not even agreed most of their contractual agreements, but now they're not even involved in the spot markets as the storage tanks fill up and construction companies don't come to pick up volumes because of lockdown measures that are affecting that sector. No one wants to take a punt on bitumen in the North African region, most of it, apart from Egypt. And, of course, as a result, prices keep going down and buyers just don't come forward to respond to the falling prices. This is the case across the board. And as I mentioned before, EGPC which has seen demand popping up including a 6-cargo requirement, which is currently being fulfilled, itself canceled a 10-cargo import tender in April, and it has a fairly erratic policy in terms of how it runs its refinery in Alexandria and how it issues import requirements and takes delivery.
So, that has been the picture, difficult picture for the Mediterranean, and it's not going to be made any easier by the fact that the Muslim fasting month of Ramadan is going to start in a couple of days' time. By contrast, there has been relative resilience in some of the Northwest European markets, which coupled with the refinery run cuts, especially in Germany, continued refinery holds most notably in France and maintenance shutdowns, like, at the Litvinov Refinery in the Czech Republic, and as Rompetrol's [inaudible 00:07:38.255] refinery in Romania means supply and demand is showing resemblance of returning to a new equilibrium, of course, at much lower volumes that has seen most domestic and inland export truck markets and prices stabilize, and in some cases, even begin to rise over the past week or so.
And that has meant, of course, that bitumen values are at huge premium, certainly on those inland truck markets are at huge premiums to crude and fuel oil prices. And once again, showing that disconnect that bitumen has shown for years from those markets. The UK and France have been, and most of all, Ireland, all of them important cargo input markets, for now, remain in the doldrums. And that leaves cargo supplies and Northwest Europe also struggling to find homes for some of their volumes, even if those inland markets are relatively good.
We'll see now, of course, what happens in France and, yeah, as the lockdown measures were eased on construction as was the case in Spain and see how that starts to improve activity and requirements from May onwards. So, that could be an important factor. So, let me now just turn back to you, Alfonso, and ask you, how do you gauge the impact of the coronavirus-related developments on bitumen prices and on its pricing, in particular, on cargo markets? Something which was already in a state of flux as IMO 2020 sulphur cap was taking effect.
Alfonso: Okay. Let's just split the answer between cargo and domestic markets. Since kind of a trading perspective, there are two building blocks when pricing bitumen in Europe. And both, they have experienced downward pressure price-wise. The main building block today is the underlying value of high sulphur fuel oil, which, it has been challenged since Q4 last year as IMO 2020 implementation has increased the volatility of the HSFO, and it has decreased dramatically its usage as banker in favor of very low sulphur fuel oil. This has raised concerns about the future liquidity of the HSFO swab [SP], and those concern are still in the back of the head of the market, although the reality is that demand of HSFO for cokers, particularly in the U.S., as well as cargoes flowing into the AG for power generation and an underlying lack of heavy sour crudes are supporting the HSFO crack and its trade. So market is still is using it with consequence that as the value of the crude has sunk from $60 a barrel to nearly $20, it has [inaudible 00:10:50.490] fit their flat price of the HSFO and, therefore, the flat price of the bitumen.
The second component in this is the supply-demand of bitumen itself. As many European and Northern African countries have entered into periods of lockdown, the amount for bitumen has vanished, particularly in the Med, putting further pressure on the flat price of the bitumen. For instance, if we look at the comparison between the price, between the 10th of January and the 10th of April, we can see that on the 10th of January, Argus [inaudible 00:11:33.168] values were at $320 a ton, where in the 10th of April Argus [inaudible 00:11:41.368] printed at $159 a ton, staggering 50% drop in value. If we look at the North market, if we look at the Rotterdam values between the 10th of January and the 10th of April, Rotterdam was trading at $363 a ton, and on the 10th of April ended up trading at $195 a ton, almost, as well, a 50% drop. Since domestic market perspective, the impact of the value of the HSFO and the brand is much softer, the cargo trading markets, because the supply-demand component of the bitumen has more weight than the cargo trading.
And there is another component, which is the Euro-U.S. dollar exchange rate that normally tends to soften the higher volatility of the brand and the HSFO. So if we look at this same period and compare Italy with Northern Germany, we can see that in the 10th of January, both Italy and Northern Germany markets that were selling X rock at 350 euros a ton, and in the 10th of April, Italy dropped by 33% at 235, and Germany dropped by 90% trading at €285 a ton. So, we can see two consequences on how COVID has impacted the prices. And one is that the domestic markets, they've been impacted much less than cargo trading markets. And if we look at regions, the impact clearly in Northern markets or countries like Germany has been much less than in countries like Italy. Now, if we want to look at the supply angle, I would like to ask you, what do we know about refinery run cuts and maintenance, and how this may impact or offset the lack of demand?
Keyvan: Well, of course, for a while as this crisis began to take hold in Europe in early to mid-March and as lockdown measures began to be imposed, refiners were able to react to the drop in oil products demand by filling up their tanks. But, of course, once these limits were reached, in many cases, there was no choice but to cut to refinery runs. And in some isolated cases so far, to shut refineries. The most obvious bitumen impacting example of that, of course, was upping decision to shut its Falconara Refinery in Italy in late March. We also know that ENI has been running its Italian refineries at about 60% of capacity. Cutbacks and crude intake and refinery runs have also affected Repsol refineries in Tarragona, A Coruña, and Bilbao, although there was no evidence yet of significant output cuts at the 1.2 million times a year, Repsol-Cepsa joint venture assessor, the joint ventures, bitumen-producing refinery in Tarragona, which has been fed with Albanian bitumen-rich Patos-Marinza crude.
Up in Northwest Europe, Shell's Turner's refinery, refinery maintenance shutdown was brought forward by several weeks to begin in mid-April following guidelines from the Dutch authorities to protect the health and well-being of staff amidst the coronavirus outbreak. In cases like these, as also seen affecting German refineries similarly hit by collapsing demand for motor fuels, bitumen production is, of course, also hit, whether intended or not. This is what we see. And on a landmark it's also, there have been run cuts at Szazhalombatta Refinery in Hungary and cutbacks have also affected them, this refinery, Pančevo, in Serbia. All those factors have also helped to tighten Central and Southeast European bitumen supply.
Alfonso: Okay, Keyvan. Thank you. And what about the freight market? Any insight about where the situation is driving ship owners other than driving them definitely mad?
Keyvan: Definitely. I think they have been [inaudible 00:16:09.966]. They're not the only ones, shipowners and traders alike, tearing their hair out. You know, I'm probably becoming as bold as I am, and thankfully no one can see that on here. But yeah, it's been a very tough time for ship owners and ship brokers trying to find business. It's been a roller coaster ride, really, for freight markets over the past year or so. We've gone from a massive oversupply of bitumen tanker tonnage about a year or so ago to a dramatic tightening and sharpy rising freight rates in the first two months of this year in part caused by the rising bunker cost to do with IMO 2020 and by strong spot demand in the Med, for example, as pricing concerns or ideas which way to price bitumen led many buyers to just not agree contractual term deals, etc., and instead, to buy on a spot basis.
And then came COVID-19, which has put a stop to spot requirements and left numerous ships lying idle, unemployed, with shipowners and ship brokers not knowing what to do. The impact of that, of course, has been a slump in freight rates. For example, on the Augusta Mohammed DIA route, with the Sicily to Muhammad DIA and Morocco, rates increased to as much as around $55 a ton at the beginning of March. Now they're back to about $35 to $40 a ton. There was one particular case of a reference to even as low as freight of $35 to $40 a ton, even, from Greece to Morocco, and that compared to a peak of about $70 a ton on that kind of route, well, in February. And even then, no buyer was found in Morocco to take on a delivered basis. But we've seen, yeah, ships just not having any homes and no business.
And on top of that, not just on the spot market, but on the term market, the time charters, that has also gone quiet with some companies like Sonatrach Shipping [inaudible 00:18:29.822], which had been looking for a tanker on time charter, as well as ENI, the Italian firm. These firms have been looking at the market for time charter vessels, but they've withdrew from that. And even there was very little demand. So, it's a market in distress. So, Alfonso, I'd like to turn to try to look ahead, one would help to better times. How do you see the bitumen market and price outlook for the rest of this quarter, and especially in the third quarter and into October, November, when the consuming season in many markets draws to a close?
Alfonso: Well, it seems that the prices could be more supported in Northern European countries than in the Med during Q2. We see that countries like Germany or France are already consuming, whether the demand in Italy and Spain with star signaling during Q2, but it will still be damaged because the stocks need to be depleted further. We need as well to consider that Ramadan starts by the end of April and North Africa is stocked.
These may drag the buying interest towards June and Q3. In terms of prices where it may happen is that further discounts from suppliers will not entice buyers in any case. So, we could phrase a relative stagnation price-wise. And these will all always be subject that the crude markets behave relatively normal. If, obviously, they behave like yesterday when the W2I closed at discounts at negative levels that is distributed if it goes to be hard to understand where the flat price of the bitumen will be. But if we put on the side these anomalies and we look at Q3 and if they will manage to feel relatively comfortable coexisting with COVID-19, then once the stocks are more depleted, we could see an increase on demand and a recovery price. Question is, is the market going to recover fully by Q3 and will we have a proper summer season?
Well, I don't think we should expect the fully recovery. We need to consider as well that the summer season pattern has been extending and displacing towards October, November in the last years. So, if this pattern persists, I think Q4 maybe better than Q3 in terms of demand and price support. In the long-term picture, I think we need to consider the consequences that it may have, the governments' budgets, which they may be cut as they are allocating funds during 2020 in order to cope with COVID-19, we could see a delayed effect in the crisis of 2009 in the bitumen market. Although this crisis is completely different and the recovery should be...is not a credit problem, so the recovery may be and should be faster.
Keyvan: Thank you, Alfonso. Thank you very much. And I think we've laid out some of the issues, some of the patterns, and some of the possible developments in this very uncertain world that we live in and the pricing too. Thank you, of course, for tuning in to our "Argus" podcast. If you're interested in reading more news stories about the impacts of the coronavirus outbreak on the world economy and commodity markets, please log on to the Argus Coronavirus hub, www.argusmedia.com/coronavirus.
Alfonso: Thank you, Keyvan. And if you are interested in a trial copy of the Argus Bitumen Report, please go to www.argusmedia.com/oilproducts/argusbitumen. Thank you very much.