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Listen in as Argus experts provide a deep dive into the asphalt markets in the Middle East and Asia-Pacific. They will provide a current state of the market and a view into the long-term outlook.

Learn more about the Argus Asphalt Annual: Your annual forecast update on the latest developments in the asphalt market, including production, trade flow and consumption data.

Listen to the other two episodes in our asphalt series, Asphalt Story: Americas Market and Asphalt Story: European and African Markets

Irina will also be speaking at the Argus Bitumen and Roads Asia conference, which is taking place the week of 6 November 2023 at the Marina Bay Sands Expo & Convention Centre in Singapore. Our global portfolio of bitumen events provide the industry with a platform for knowledge sharing and critical networking opportunities. The upcoming Argus Bitumen and Asphalt Europe Conference will take place on 14-16 May 2024 in Madrid, Spain.


Irina: Hello and welcome to our podcast the Asphalt Story. Today we want to give an overview of the Asian and Middle eastern markets. I’m Irina Vinogradova, Sr Manager for Argus Consulting Services and with me today are Leanne Tan, Editor of Bitumen report covering Asian markets, Claire Ng, Reporter covering Middle East and Asian markets, Sarah Raffoul, Manager in Argus Consulting responsible for crude and refined products coverage in Middle East and Elliot Chan, Analyst from Asia Consulting team.

Leanne Tan

Question: We have seen a lot of volatility in the crude and refined products recently, has that impacted the Asia bitumen market in any way?

Market participants are a bit unnerved for sure. Tensions in the Middle East, unpredictable weather patterns, and a recent sharp decline in fuel oil prices have all added an element of uncertainty to theSo in a nutshell, regional trades in Asia are generally slow. There are a handful of enquiries, though demand is by no means strong. But having said that refiners are also not under pressure to sell. And the slower trade has also impacted vessel availability, which is on the high side. There is no shortage of vessels as tighter supplies, coupled with muted downstream demand has left vessel owners with fewer cargoes to load and ship. near-term outlook. But demand and supply fundamentals that have been unique to the Asia bitumen market, has still been the main factor influencing price trends over the past weeks.

The Asia market is finding itself in a bit of a stalemate. On one hand, supplies are tight. And from what we observe, most producers in Singapore are not under pressure to sell as we head into the last quarter of 2023. There are some maintenances happening in northeast Asia, and some southeast Asian producers are looking to cut operating rates over the November and December time frame. All these factors have curtailed supplies.

And we saw this reflected in the offers that the producers were putting out for November and December. Many producers have raised their offers for November- and December-loading cargoes over the past weeks, citing a lack of inventory pressures.

There is some interest to see how recent steep drops in fuel oil pricing could impact bitumen production. Bitumen prices on a fob Singapore basis are currently trading at premiums to HSFO, and there are some who are curious to see if this could incentivize some refiners to produce more bitumen instead. Although for now, we have not yet seen any major changes to production plans.

Question: How has bitumen demand in Asia performed? Has there been any demand side support in the market?

On the demand front, we do see some enquiries emerging from Malaysia and Indonesia in October. And summer demand from Australia has also started to come in. And while that has provided some support to the market, we find that demand from China and Vietnam is still noticeably lacking, and there have been some questions raised over the sustainability of any pricing uptrend, in light of this.

For China, the second-half October and first-half November marks the last window of opportunity for a demand pick up, as road paving activities in north China typically wraps up by late-November ahead of the seasonal winter lull. And while there has been some restocking interest seen, import demand is still extremely weak, as arbitrage economics, especially for Singapore origin cargoes, remain unworkable. East China is also struggling to absorb export cargoes from South Korea, given that domestic availability is still very much sufficient to cover requirements. And that has left some traders looking to move these South Korean volumes to other markets instead, with the Vietnamese market being the prime candidate.

Which brings us to Vietnamese market. Vietnam has been well-covered by a variety of supply sources, primarily from the Middle East and more recently, as we mentioned, South Korea. The South Korea to Vietnam trade flow has also been facilitated by a widening spread between fob Singapore and fob South Korea prices. While Singapore export pricing has been supported by tighter supplies, like we talked about earlier, a dearth of buying interest from the China market has weighed down the fob South Korea pricing – China being the main target market for South Korean exports. And the relatively cheaper pricing of South Korean exports now (relative to Singapore export cargoes) has piqued the interest of some traders, who have already moved some of these volumes down into Vietnam.

Elliot Chan

Question: Recent economic analysis forecasts slower economic growth in China. How is that expected to influence the Chinese market for bitumen?

Municipal government debt is slowly becoming a more significant issue and could result in declining demand for bitumen. Municipal governments issue debt through local government finance vehicles, which raise money for infrastructure projects, including highways and roads. But tighter fiscal funding from municipal governments because of slower macroeconomic conditions has weighed on road-paving activities and curbed Chinese bitumen demand.

However, we should note that historically, the Chinese government has been the main driver of bitumen demand. The government has been spending heavily on infrastructure and highway expansion. Therefore, China’s demand for bitumen is expected to remain relatively firm as multiple projects have already been committed to as part of China’s Five-Year Plans, which commits China to its goal of increasing its highway lengths at an annual rate of 3-4pc per annum.

In 2023, China has put together a five-year transportation infrastructure investment plan. The plan would expand expressways under the central government's purview to 130,000 kilometres by its final year of 2027, up 11% from the end of 2021.

Looking at supply in 2023, total production year to date has increased by 1.79 per cent, according to China’s National Bureau of Statistics. However, it should be noted that production in Shandong, the largest bitumen-producing province, has declined by 10 per cent in the same period. This indicates that bitumen production is becoming decentralised and is spreading out in the other provinces.

Overall, the expected decline in demand and robust production figures in China will result in lower prices in the short to medium term. However, the extent of the decline in demand is still uncertain as it depends heavily on how China responds and how China implements its infrastructure expansion projects.

Question: How does the impact of Russian crude in South Asia markets affect the market for bitumen in the region?

The war has been ongoing since February 2022, and India has experienced a shift in its import basket. Most of its crude has shifted from Middle Eastern sources towards Russian crude. Based on data from India’s Petroleum Planning & Analysis Cell, production from April 2023 to August 2023 increased by approximately 8 per cent compared to the same period in 2022. However, we do not believe these results from a shift in the import basket. Rather, it results from increased crude run rates, which have increased by 2.5 per cent.

Demand for bitumen in the region is expected to continue increasing due to India’s ambitious highway expansion programmes. According to government sources, India has been building national highways in 2022-2023 at a rate of 50km per day. The government intends to award 1000-1500km in projects in 2023-2024, indicating that this trend will continue in the near future.

Question: Are there any major changes in the bitumen market in Southeast Asia that impact the forecast?

Currently, there have not been many significant policy changes. However, there has been an announcement in the Philippines which has the potential to result in increased regional asphalt demand.

For the Philippines, highway expansion has been identified as a key sector under President Ferdinand Marcos Jr.’s ambitious “Build Better More” program. President Marcos has targeted spending at least 5% of GDP annually on infrastructure spending. This is in line with the promises made by the previous administration under former President Duterte.

According to the 2024 budget, the Department of Public Works and Highways (DPWH) will receive 2.67 billion USD to construct and improve roads and 2 billion USD to conduct preventive maintenance and repair of roads. Given that the Philippines has no bitumen production facilities, we expect that regional imports will solely meet their demand.

Claire Ng

Question: Seaborne bitumen prices in the Middle East has been fluctuating in the last 6 months despite poor demand. What are the factors affecting Middle East prices?

Middle East prices are mostly driven by South Asia demand, which has been lacklustre since around March, especially in India. Major factor which is impacting demand there is lack of funds, the government is not releasing funds on time and many road contractors are struggling to procure bitumen from importers or domestic refiners to continue road paving projects. With central elections in the next year, many market participants expected demand to surge in this calendar year and had pre-purchased quite a lot of bulk and drummed bitumen volumes. Now, with poor consumption there is a supply glut of imported bitumen in the country and most of the importers are disinterested in procuring fresh parcels. Well! Initially when there was some ullage in India, prices were the focal point. This was around June-July period and prices were under $300/t. But Middle East prices started to inch up because of higher feedstock cost and stronger foreign exchange rate despite weakening demand in key consuming India. Now, many importers in India and South Asia are on the sidelines as inventories are high and any drop in prices, possibly and again because of low demand in India, are not going to excite these importers as the focus is on domestic demand. But the rapid fluctuation in the prices, albeit in tight range about $30, was purely because of production cost and exchange rate fundamentals.

Question: What are the current market expectations for India demand for the rest of the year?

Very short answer to this question would be, it all depends on whether the government will release funds. But market participants in India are a bit upbeat about demand in November and December. They are positive that state governments, which had been diverting infrastructure funds for other subsidy related schemes, will eventually release all funds in the coming month and demand would peak in November and December. Last calendar year, India consumed around 8.05 million tons, initial expectations were for consumption to surpass that level this year. Market participants now believe that consumption would reach last year’s level at the least if not surpass it. But the domestic refiners have taken a production cut until demand strongly improves again. Having said that, a few Indian importers had mentioned to us recently that India has enough pending and new road projects for all the pent-up inventories of imported cargoes, roughly around 350,000t to get consumed in a week to fortnight so on paper there is very good demand for bitumen, but funding is a pressing issue.

Question: Poor consumption in South Asia has pushed many South Asian vessel owners cum traders and Middle East exporters to take bitumen cargoes, especially bulk bitumen, into Southeast Asia. Is there an active arbitrage window for Middle East cargoes into Asia? Will this continue in the near term?

An active one, not really. But given that Middle East origin cargoes are relatively cheaper then Asia origin material, there is always some demand for Middle East cargoes. Last year, Singapore prices on fob basis were around $200/t higher than the Middle East, that was when an active arbitrage window was open, and many SEA countries consumed Middle East barrels. The freight from Middle East to Southeast Asia is around $150/t. So on a cfr basis there is still a gap between Middle East and Asia volume but the demand is not as high as last year. Major reason is prompt availability, it takes around a month for Middle East bulk cargoes to reach SEA so the traders have to wait for those cargoes and also predict the price volatility forward curve before closing a deal, in order to avoid any profit margin losses against Singapore material. Also, demand generally peaks around the end of the year, especially in Indonesia, so traders typically opt for supply sources which are in their proximity in order to avoid any supply chain issues. Having said that, Vietnam has been importing some Middle East cargoes in the second half of this year. Demand there is pretty tepid and that has been pressuring the domestic selling price to a few importers opted for Middle East barrels instead. And as long as the gap between Singapore and Middle East prices are wide on both fob and cfr basis, this flow would continue in the near to mid-term.

Sarah Raffoul

Question: What are the drivers influencing demand in the Middle East?

The main drivers for asphalt consumption in the Middle East is economic growth, infrastructure development, urbanization, maintenance and rehabilitation, weather conditions and government policies.

But the impact of the economic situation is not uniform and depends on the specific circumstances of each country in the region. Some countries face geopolitical challenges that impede the growth in projects, while others have been facing economic challenges. I will give you an example of two countries that have faced different challenges.

The first one is Iran, its biggest challenge is to overcome the adverse effects of sanctions on finance, inflation and access to technology. Iran, the third largest bitumen consumer the region after Saudi Arabia and Turkey, has seen demand stall around 1mn t since 2019 and is expected to hover at that level in the next few years, especially as sanctions in Iran has made it very difficult for the country to finance its projects.

The second one is Turkey, which has been facing economic challenges such as high inflation and rapidly weakening currency, which has kept a lid on its projects. Turkey has announced new road projects, airport expansion projects, which includes the expansion of the Istanbul New Airport, also referred to as Istanbul Grand Airport and the expansion of Antalya International Airport. Reconstruction projects post-earthquake that struck southern and central Turkey in February has been slow. Eight months on, rising construction costs and economic uncertainty have deterred companies from bidding for government reconstruction contracts, making the deadline for reconstruction look hard to reach, especially in the worst-hit areas.

Demand in Turkey seems to have peaked in 2017 at 3.265mn t and is forecasted to plateau at around 1.4mn t over the next few years. A recovery seems unlikely as long as interest rates remain high, as a result over the forecast period is lower than what it was pre-covid. The CAGR for asphalt consumption between 2023-2027 is just 0.2pc.

Meanwhile, other countries are less influenced by these factors, such as Oman and the UAE, which have reached a steady demand – and not much growth is expected going forward.

Question: Are there any new supplies on the horizon?

Capacity in the Middle East has been on an upward trend since 2021 and is expected to peak by next year at 19.935 mn t before it is expected to plateau in the next several years. The peak in bitumen capacity comes as the Middle East refining capacity is expected to peak in the next few years. Middle eastern countries, particularly GCC countries are given the uncertainty over long-term oil demand, bringing an end to more than a decade of rapid expansion, which is unlikely to approve any further export-oriented refinery projects.

The increase in capacity next year is led by Iraq, which is estimated to see capacity increase by 10pc year on year. The 248,000-t additional capacity is expected to come from new and existing projects in Iraq as part of a post-war drive for Iraq to rebuild its oil and gas sector. And that will offset the loss in capacity in Bahrain. Bahrain’s state-owned Bapco plans to phase out fuel oil production, following the upgrade and modernization project at its Sitra refinery and consequently we will see a decline in bitumen production by 2025.

With higher total capacity we expect refineries to run at a higher refinery utilization rate. So over the forecast between 2023 and 2027 we have an average utilization rate of 73.2pc and that compares to 70pc across the previous decade so from 2010-2019. As a result, we are seeing higher production levels year-on-year.

Iran will continue to lead as the region’s largest producer over our forecasted period.  Iranian production will stand between 5.5-6mn t over our forecasted period and to put it into context, that represents about 42pc of total production in the Middle East. The target markets for Iranian bitumen are mostly neighboring countries such as Pakistan, Iraq, the UAE and some African countries. While Iran plans to lift its refining capacity to 3.4mn b/d by 2025 from 2.2mn b/d today, uncertainty persists over the fact on whether it can reach its goals given the extent of the challenges the sector faces.

Question: What does the balance look like? Particularly as Saudi has now resumed bitumen exports after a gap of two decades?

So, supply is expected to continue to outweigh demand widening the surplus in the region. The net export position of the Middle East is expected to increase and peak at 6.219mn t in 2024. What is adding to the surplus, and it’s what you mentioned in your question, is Saudi Arabia. State-controlled Aramco base oils arm Luberef has shipped its first bitumen cargo of around 5,000t from Yanbu at the end of June. It wants to export up to 500,000 t/yr from Aramco’s Yasref refinery, which is a joint venture with China's state-run Sinopec.

Saudi Arabia was traditionally a significant bitumen importer, regularly buying cargoes until a few years ago in term deals from the Mediterranean region and other sources in order to meet its road-building requirements. But domestic demand has waned in recent years, accounting for just 70pc of levels seen in the late 2010s, leaving sizeable surpluses available for export markets.

The move would add to global supply at a time when concerns over bitumen production and availability in many parts of Europe have been heightened by the EU and UK ban on imports of Russian crude, refinery feedstocks and bitumen.

Aside from the likely exports into the Mediterranean through the Suez Canal, Aramco will be well-placed to compete with global suppliers in exporting bitumen to increasingly import dependent South Africa. It could supply cargoes to Asia-Pacific markets, depending on relative arbitrage economics.

Irina: Thanks guys and thank you all for listening. For further information about the bitumen coverage, you can check out Argus Bitumen publication and Argus Asphalt Annual 2023. And to learn more about Argus Consulting Services visit