Reshaping global bitumen markets: Asia in focus

Oliver: Hello, everyone, and welcome to our podcast outlook series, where we explore the latest development shape in the global bitumen market. This series runs alongside our newly launched Argus Bitumen Analytics service, a bi-annual report providing forward-looking global and regional market analysis, supported by country-level supply and demand balances covering well over 100 countries. Following the recent release of this report, it seems a fit in time to take stock of how the global bitumen market has performed so far this year, and more importantly, where it could be heading next.

Today, we'll focus on Asia, arguably the region that has experienced some of the most significant market volatility this year. I'm Oliver Thompson, the global lead for Argus Bitumen Analytics, and today I am joined by Swasti Dharmadhikari, our lead analyst for the Asian market, and Sathya Narayanan, associate editor for Argus Bitumen. Thank you both for joining me today.

Last year, the key question was how slowing economic growth and tariff-related trade tensions would affect bitumen demand. This year, the market faced a very different challenge. The closure of the Strait of Hormuz triggered the largest oil supply disruption in history, shifting the tension away from demand and onto the resilience of the global supply chain. We have a lot of great analysis to cover today, so I'm gonna jump straight into our first question, and this one's for Swasti. Swasti, could you please offer an overview of the global bitumen market this year and what have been the key drivers shaping fundamentals?

Swasti: Thank you, Oliver. So, the biggest conclusion from this year's analytics is that bitumen markets are increasingly being shaped by refinery operation and economics, rather than installed capacity. So, the Strait of Hormuz demonstrated this clearly. While only 5% to 10% global bitumen exports typically move through Strait, roughly 30% of global crude exports do. So, the impact on the bitumen therefore came mainly through restricted crude availability and lower refinery throughput, particularly in Middle East and Asia. The strong middle distillate economics added further pressure by encouraging refiners to prioritize high-value transport fuels. These operational disruptions elsewhere reinforced this. In Russia, our estimates such as total refinery runs fell from around 22 million tonnes per month at the start of 2016 to 14 million tonnes per month by September. Although most attacks did not directly target bitumen units, lower refinery throughput constrained the bitumen output.

So, despite the global bitumen capacity of around 185 million tonnes per year, production is forecast at only 117 million tonnes in 2026, which is down by 5.5% on that year. The story of 2026 is therefore not lack of capacity, but how much the capacity refiners actually operate and how they use it.

Oliver: Interesting. And so, what are the assumptions for these drivers and how will they shape the bitumen fundamentals going forward?

Swasti: Our base case is that conditions around Strait of Hormuz gradually normalize through first half of 2027, improving crude availability and supporting a gradual recovery in refinery operations and bitumen production. What changed in 2026 was utilization. Lower crude availability and refinery outages reduced the throughput, while strong middle distillate economics encouraged the refiners to favor high-value transport fuels. Singapore diesel reached around $1,220 per tonne by mid-October, compared with bitumen at around $800 per tonne, creating an exceptionally wide differential. We expect this differential to narrow significantly in 2027, with diesel moving towards around $600 per tonne, and Singapore bitumen forecast at around $500 per tonne. As diesel economics normalize, coking utilization should soften, making refinery economics more supportive of bitumen production.

Oliver: Thank you, Swasti. And it's interesting to hear the insights from the Middle Eastern-Russian bitumen markets as well. But as I mentioned at the start, Asia arguably has been the most impacted from this disruption. So, I think that's what we should take a closer look at. And so, with that, let me pass the next question to Sathya. Sathya, how has the Strait disruption impacted Asian markets this year?

Sathya: Thanks, Oliver. Well, Asia bitumen market has been one of the most affected because most Asian refiners prefer Middle East origin bitumen as crude to produce bitumen, especially during the peak demand season. For instance, India's peak demand season is mostly between February to May, while in Southeast Asia it is on the last quarter of the year, which is going on currently. Limited availability of bitumen as crude has weighed on bitumen output, and Asian seaborne prices have surged to record highs, especially rightly mentioned before, it's over $800 per tonne. Refiners did not have many viable options, and they started seeking lighter crude grades to maintain processing rates.

For instance, India increased its import of Arab Light and Murban since April in the absence of much preferred Basrah Heavy and Basrah Medium. On the other hand, Singapore imported more Murban and WTI. By the way, we all know that India imports a lot of Russian Urals. Urals yields around 19.3% residue, while Murban yields around 18.1% compared with 21.5% residue yield for Basrah Medium and 25.15% for Basrah Heavy, while residue account only for about 4% of WTI's yield per volume.

So, that means that, you know, residual outputs from these crude grades, which these countries have imported is much lower than before the war. During the second quarter of this year, many Southeast Asian refiners and trading firms had to declare force majeure for bitumen exports. For Southeast Asia, although bitumen exports from South China have tried to plug some supply gaps caused by limited output from key exporting regions such as Singapore and Thailand, it is still not sufficient for the Southeast Asian markets. And price-sensitive importing regions like Vietnam are now ready to take positions at higher price levels for Singapore-origin cargos to meet their year-end deadlines. But India, on the other hand, lacks alternate supply sources because of grade specification. This I'm talking from a bitumen point of view.

India does not consume, to a larger extent, the usual penetration 60/70 grade bitumen. They need viscosity grade bitumen. India consumption is over 8 million tonnes a year, while production is only about 5 to 5.5 million tonnes a year, making India a net importer of bitumen. And seaborne VG grade bulk is predominantly available, only from the Middle East. South China, however, can produce VG grade depending on demand and arbitrage economics.

For the first time ever, we saw India import two VG grade parcels from South China, one in the first quarter of this year and the second one in June. Given South China prices have surged and are close to Singapore values, which is trading at a more than $500 premium to that of Middle Eastern values, Asia-origin cargos are not viable for India. Europe is, of course, another possible supply source and the arbitrage window for Europe cargos to enter Asia is wide open now, but Europe does not produce VG grade. Hence, India is still depending on the Middle East for seaborne volumes. Third quarter was still manageable because the monsoon season weighed on consumption, but the post-monsoon demand cycle begins in October and progresses to Q4.

So, is India getting sufficient bitumen from the Middle East at a time when bitumen output from Indian refiners have been cut in? The answer is unfortunately a big no. The U.S. naval blockade in the Middle East and in turn attacks on vessel transporting Iranian products have pushed vessel owners to the sidelines. Although Iran has sufficient supply and their prices are at much lower levels compared to Singapore and other Asian producers, cargo flows have been limited because vessels are unable to block the U.S. blockade. On top of that, the U.S. has also sanctioned many bitumen vessels since the start of the U.S.-Iran war. So, bitumen availability in India is likely to remain tight during the current quarter.

Oliver: Wow, that sounds like there's so many moving parts here fundamentally speaking. What would you say has been having the biggest influence on Asian bitumen pricing and availability so far in 2026?

Sathya: Demand has been firm since last month. Regions which are very price-sensitive, like I previously mentioned, Vietnam, are ready to take positions at higher levels because year-end deadlines are looming. Some projects specifically require Singapore-origin cargos and Singapore values are currently over $800 per tonne at record highs. And still, these price-sensitive regions are buying. Asian importers are also buying cargos at a steep premium to that of Argus FOB Singapore ABX1 index which is the benchmark index for the region.

Taiwan for instance is a net exporter, but a key refinery in Taiwan has been seeking cargos via import tenders almost every month since the war began. This is because Taiwan domestic market is robust in the run up to the local elections in November. Now, South China cargos have travelled to Oceania markets. European and U.S.-origin cargos are also moving towards Asia as we speak and at least two parcels have reached Australia and New Zealand already. Why? Because this is the peak paving season in Australia and New Zealand. And sufficient supply is unavailable from traditional sources such as Singapore and South Korea. Pakistan has also been exporting one to two cargos per month and these volumes have reached South Africa, Australia, and Malaysia as per vessel tracking data.

Meanwhile, Indian state-controlled refiners rarely issue spot import tenders, but this is not a rare phenomenon anymore. We have seen at least two key state-controlled refiners issue a few spot import tenders in the previous quarters and have concluded them at a steep premium to the Argus FOB Mid East Gulf Index, which is the benchmark index for the region. One of the import tenders in the second quarter was settled using South China cargo which was discharged into Kakinada on the East Coast, and the impact is not just on seaborne and domestic bitumen values by the way. As I said, it's multiple factors.

Freight rates have gone up because of higher bunker values in Southeast Asia. Freight rates of bulk bitumen tankers moving between the Middle East and India has jumped multi-folds. What was below $100 per tonne to the West Coast from the Middle East before the start of the U.S.-Iran war is currently over $300 per tonne because of higher additional war risk premiums, crew costs, bunker values, etc.

So, given the combination of factors here, you know, there is one bright spot which we can talk about which is South China. South China is a bright spot because they are able to export more and plug some of the supply gaps in Southeast Asia. We launched our FOB South China assessment in July which is actively being referred by the Asian market participants and prices have jumped from around $600 per tonne in end July to around $850 per tonne currently, which is by the way, very close to the Singapore values.

Oliver: Interesting and congratulations on that benchmark release. Let's keep the conversation on China actually and move a bit outward to the whole country itself. So, as we know, the country does account for the vast majority of Northeast Asian production and demand. So, I guess this question, I'll pivot to Swasti. Swasti, how important is China's recovery to our regional outlook and what assumptions underpin that forecast? And if you don't mind, could you also talk a bit about outside of China and where do we see the strongest sources of future demand growth across the region?

Swasti: Yes. And I think China is really the key market to watch here. It is central to the North Asian outlook because changes in Chinese market effectively determine the direction of the regional balance. It is also the world's largest bitumen producer and consumer, so the recovery matters beyond Northeast Asia. The scale of 2026 adjustment is significant. Chinese consumption is forecast to fall from 40 million tonnes in 2025 to 34 million tonnes in 2026, while Northeast Asian demand declines from around 43 million tonnes to 36 million tonnes. But these are two sides to the decline.

On supply side, tighter crude availability and lower refinery throughput constrain the potential production. On the demand side, weaker government-funded road activity reduced bitumen requirement. Because consumption weakened alongside production, China did not need to compensate for the reduction in the domestic output with a comparable increase in imports. So, that helped prevent the supply shock from translating into much tighter regional balance. Our outlook assumes those pressures begin to ease. Refinery runs had already recovered from around 50.5 million tonnes per month in June to 58 million tonnes per month in August, while improving crude availability should support a further recovery in the refining activity.

As a result, Chinese bitumen consumption is forecast to recover to 38 million tonnes in 2027 and 41 million tonnes in 2028. But I think the distinction is important. We see this primarily as the recovery of the volumes lost during the 2026 downturn rather than beginning of a new structural demand boom. Outside China, the growth story looks quite different. India is the clearest source of expansion, contributing around 2.2 million tonnes of the 2.6 million tonne increase in the demand across the rest of Asia between 2026 and 2030, with consumption reaching around 9.5 million tonnes. Vietnam and Thailand also provide additional growth supported by investment in highways, logistics, and corridors, and transport infrastructure.

So, Asia is increasingly developing two distinct demand stories. China drives the scale of regional recovery, while India and parts of Southeast Asia provide much of underlining growth. So, as import requirements rise in those markets, trade flows will become increasingly important in determining how that growth is supplied.

Oliver: Thank you for the comprehensive picture there, Swasti. And let's just wrap this up with one more question. If there is one conclusion from this year's analytics report that market participants should pay interest in, what would that be?

Swasti: If there is one takeaway from this year's analytics, it is that market participants need to pay closer attention to the operational factors that determine how much installed bitumen capacity actually translates into supply. Limited capacity growth itself is not new. What has become more important is the pressure on the refinery operations and trade flows become more uncertain, and wider oil market volatility affects crude availability and product economics. 2026 demonstrated that very clearly. Globally there is around 185 million tonnes per year of installed capacity, but production is forecast at only around 117 million tonnes.

So, the difference reflects the fact that available capacity alone tells us relatively little about actual bitumen availability. When refinery runs are lowered, more refiners have stronger economic incentive to maximize other products. The Strait of Hormuz disruptions reduce the crude availability while strong middle distillate encouraged to favor more transport fuels. Russia provided another example. Disruptions did not need to directly hit a bitumen unit to affect supply because reducing overall refinery throughput was enough to constrain the bitumen output. And that relationship works in both directions. As crude availability improves and middle distillate economic normalizes, we expect refinery conditions to become more supportive of bitumen supply. But operational reliability remains a risk, particularly following a year in which refiners have had strong incentives to maintain high runs.

At the same time, production is becoming increasingly concentrated. The top 10 producing countries account for around 74% of global production in 2026, rising to approximately 78% by 2030. That means developments in major markets such as China, India, and Middle East can have an increasingly large influence on global balances. So, ultimately some of the most important signals for the bitumen market will increasingly come from outside the bitumen market itself that is crude availability, refinery operating rates, product margin, and changing trade flows.

Oliver: Thank you, Swasti. And thank you both. That was very informative. Well, while that is the end for today's episode, I will mention that we will be releasing an insights paper this month that discusses this topic too that we encourage listeners to check out. And for listeners that would like access to all forward-looking market commentary and data we provide, please refer to the recently released Argus Bitumen Analytics. And if you would like to be in the loop on day-to-day developments in the bitumen market, then the weekly Argus Bitumen Report could be for you. You can find out more for both of these services if you get in touch at oil-products@argusmedia.com. We thank you all for listening and until next time. Goodbye.