New York, 6 February (Argus)
East
coast commentary
There were no wholesale transactions heard from the East coast market. Local
participants reported stated that strong economics for fuel oil have provided
an attractive alternative for one or more local refiners. Additionally, one or
more refiners have historically stayed out of the winter-fill market,
preferring to run lighter crudes to make lighter yields. The end result has
been no new wholesale transactions from East coast refiners.
Additionally, one export source has already sold its winter-fill asphalt quota into the East coast, with deals completed at the end of last year. This export source has no additional winter-fill volumes to offer into the East coast. An anticipated spring turnaround at the refinery of an export source, could keep wholesale availability low in the coming months.
With the lack of wholesale availability from local refiners, East coast buyers have been seeking winter-fill/wholesale from other sources. Traditionally, East coast buyers (especially those along the coast) have sought volumes from the Gulf coast. However, since the Gulf coast wholesale market is tight, with only one eastern Gulf coast refiner offering volumes, East coast buyers have been turning increasingly to Midwest sources for rail volumes.
PG 64-22 rail volumes moving to the East coast from Midwest sources have been landing in the $200-205 delivered range, according to East coast buyers. One Midwest supplier stated that its rail quotes for April were as high as $180 fob for East coast.
February has started off with significant retail price increases on the East coast. From 1-3 February, three New Jersey refiners had announced retail price changes at some or all of their asphalt terminal locations.
One refiner reported taking its prices up in all markets north of Savannah to the $275 fob level for PG 64-22. This represented a $25-30 increase, depending on the market.
Another refiner reported taking its New Jersey terminal prices to $275 fob for PG 64-22. The supplier raised its Baltimore, Maryland and Richmond, Virginia prices for PG 64-22 to $275 fob, with PG 70-22 at the $290 fob price. These prices were reported to be effective on 3 February.
Another East coast refiner raised its PG 64-22 prices on 3 February to $275 fob in Baltimore, Maryland. The supplier took its New York Harbor prices to $275-285 fob, with the upper end of the range applying to the Long Island market. PG 70-22 was reported to have a $15 premium over PG 64-22.
Atlanta, Georgia prices were reported by one player to be in the $225-250 fob range. Savannah prices were reported to be as high as $235 fob.
Last week, one Florida supplier raised its prices in Tampa and Jacksonville to $235 fob, an increase of $15 over the prior week. Pensacola prices were heard at the $230-235 fob range.
Gulf
coast commentary
Gulf coast marketers have seen strong asphalt liftings at the racks due to
paving-perfect weather conditions. Strong paving in Florida brought several
buyers out seeking wholesale volumes. Other Gulf coast markets also saw strong
liftings. However, wholesale asphalt supply was far from plentiful in the Gulf
coast region.
One western Gulf coast supplier's crude unit went down on 20 January and is expected to remain down until 10 February. During this planned turnaround, the supplier will make no asphalt and will be a net buyer of wholesale asphalt.
Another western Gulf coast refiner was producing fuel oil over asphalt. Asphalt's HSFO alternative was at $231.26/st last week, which represented the value of asphalt if it is blended into fuel oil. Hence, a Gulf coast refiner would require at least this amount if it were to justify selling asphalt wholesale in the market instead of blending to fuel oil.
An eastern Gulf coast refiner that sold wholesale volumes at $170 fob two weeks ago reported that it had no additional volume to sell in the first half of February. The supplier stated that based on the current cost of crude and the strong alternatives for making fuel oil, it did not expect to repeat the $170 fob wholesale asphalt price.
A Gulf coast buyer reported purchasing a wholesale barge from a Midwest refiner at a delivered price of $207. The buyer stated that the deal was for PG 64-22 and was done in late January. The fob (Midwest) equivalent price was reported to be $167 fob.
One Gulf coast supplier quoted volumes at $190 fob in the Gulf coast for movement within the region. However, instead of doing the deal, the supplier opted to use the volumes to build its own inventories. Most suppliers in the region have not had an opportunity to build stocks due to warm, dry weather, and resultant strong asphalt liftings.
Retail prices were stable to higher in the Gulf coast region. Southern Alabama prices were unchanged from the $230-235 fob range, while further inland prices were stable at $235. Prices in this market have not changed since early January.
There was a wide range of prices in southern Louisiana. One supplier stated that its prices were unchanged at $195 fob, while other numbers were heard at around the $215 fob level.
Last week, one Texas supplier informed its customers that it was taking its retail prices up by $15 for PG 64-22. With this change, its retail numbers in south and west Texas rose to $265 fob. Volumes moving from Oklahoma into the Dallas/Fort Worth metropolis also moved up from the $245-250 fob level to $260 fob Oklahoma.
The New Mexico market was reported to be very quiet, with very limited new tendering activity. One local supplier reported that it recently quoted $335 fob for a job requiring PG 70-28.
Midwest
commentary
Midwest wholesale barge prices for February were in a wide $147-162 fob range
for PG 64-22. This price range was for volumes moving within the Midwest
region. Midwest barge quotes for March were heard at $165 fob from one supplier
for volumes moving westbound.
A Midwest refiner sold a barge to a Gulf coast buyer at a delivered price of $207. The deal was for PG 64-22 and was done in late January. The fob (Midwest) equivalent price was reported by the buyer to be around $167 fob.
Rail wholesale quotes were higher than barge wholesale quotes. Marketers stated that strong demand from the East coast, southwest and West coast markets was the driving force behind higher rail wholesale prices. Rail quotes were heard in the $155-180 fob range from various Midwest suppliers. Rail quotes for April were as high as $180 fob for East coast, and as high as $200 fob for the West coast.
PG 64-22 rail volumes moving from the Midwest to the East coast have been landing in the $200-205 delivered range, according to buyers. Midwest suppliers reported very high buying interest from the East coast market due to a scarcity of offerings from East coast refiners and tight supply in the Gulf coast. At least one export source to the East coast had no additional volume to sell.
Midwest retail prices and quotes at lettings started to move up last week. An Oklahoma supplier informed it's customers that it would be raising prices from $245-250 fob to $260 fob for PG 64-22, effective 6 February. With one or more Oklahoma suppliers producing flux, there was some concern about tightness, and even shortages, of paving grade asphalt in the state.
In Kansas, PG 64-22 volumes were reported to be selling at the $260 fob level. Valero's Arkansas City, Kansas terminal was open for business last week.
Current quotes in Chicago, Illinois were heard at $210-220 fob for early 2006. One supplier reported central Illinois at $235-245 fob for quotes for early 2006 work.
At last week's Michigan letting, quotes from one Detroit-area supplier were heard at $235 fob for PG 64-22, with PG 58-28 quotes at $245. An inland Michigan supplier quoted $245 fob for PG 64-22, and $265 fob for PG 58-28. One player reported quoting polymer PG 70-28 at $360 fob. A marketer commented that polymer grades are demanding higher premiums due to the difficulty in making these grades. Additionally, softer components that get blended into polymer asphalts are being drawn into the gasoline market.
Some quotes in southern Wisconsin were heard at the $240 fob level for GP 64-22. At least one supplier was offering a $20 premium for PG 58-28.
In northwest Indiana, current quotes for early 2006 paving were at $215-225 fob for PG 64-22. Current quotes for early 2006 work were at $220-230 fob in Indianapolis, Indiana, according to one local player. Another player reported quoting the $230 fob price.
In Ohio, Toledo quotes were at $250 fob for PG 64-22. Canton and Cleveland, Ohio quotes were also heard at the same level. One supplier in the Cincinnati market reported raising its selling prices to $215 fob, an increase of $10 from the prior week.
Western Kentucky quotes were heard at $240 fob for PG 64-22, with a $10 premium for PG 58-28. Eastern Kentucky selling prices were at $215 fob, with quotes reported to be in the $240-250 fob range (not-to-exceed) for the first half of 2006.
In Chattanooga, Tennessee, one supplier moved its current selling prices to $235 fob last week, from the $215 fob level. Knoxville prices went up by $15 to $230, Louisville prices went up $10 to $220, Memphis went up $10 to $235, and Nashville went up $10 to $225. Higher prices in the nearby Atlanta market may have had a ripple effect through Tennessee.
Rocky
Mountain & west coast commentary
Historically, the Rocky Mountain region has an abundance of asphalt during the
winter months, which results in the region having the lowest winter-fill prices
in the US. However, this year is different. The Midwest appears to have
replaced the Rockies as the region with an abundance of wholesale asphalt, and
the Midwest is touting wholesale prices that are lower than what Rocky Mountain
suppliers are willing to sell at.
The prolonged paving season in the Rockies, along with refiners switching crude slates towards lighter and sweeter crudes, are thought to be the two key reasons behind the deviation from the historical trend. Midwest refiners, on the other hand, are running heavy crudes through their integrated refineries, with the resultant increase in asphalt production.
Rocky Mountain wholesale prices moved up from the $150-155 range to $150-165 fob last week. One local supplier raised its wholesale prices from $155 to $165 fob for February. The supplier stated that its production was down from previous years due to a crude slate change. The supplier was not seeking any new customers and was only supplying asphalt to its traditional buyers.
Rocky Mountain and West coast buyers stated that the reduced availability of wholesale supply from the Rockies has forced them to look at other non-traditional sources for supply. These buyers have been seeking volumes from suppliers are far as the Midwest and have been hauling volumes in by rail. Buyers have been willing to pay the higher freight rates just to get secure supply for the upcoming paving season.
The increased demand for Midwest rail volumes caused a spike in rail wholesale quotes from the Midwest compared to barge wholesale quotes. Midwest refiners have been faced with strong demand from the East coast, southwest and West coast markets. Rail quotes were heard in the $155-180 fob range from various Midwest suppliers. Rail quotes for April were high as $200 fob Midwest for delivery to the West coast.
Rocky Mountain buyers complained that this has not been a traditional winter-fill market. Buyers are not finding any winter-fill bargains, and are being forced to adjust retail prices in order to stay with the wholesale price increase.
Wholesale buyers are also concerned that stronger retail prices in markets such as California, will result in the redirection of wholesale volumes to that market (as refiners will realize more favourable netbacks). The end result could be reduced wholesale supply availability for other West coast or Rocky Mountain markets.
One supplier reported Idaho retail selling prices to be up to the $240-250 fob level for PG 64-22. Higher wholesale prices were reported to be the main reason behind the price increase.
Retail selling prices in Oregon were at $235-240 fob for PG 64-22. PG 70-22 was reported to have a $0-10 premium, depending on the supplier. Recent quotes for PG 64-28 have been at $260 fob, while PG 70-28 quotes have been at $270 fob. One supplier stated that it had some PG 70-28 work on the books at the $270 fob level as well.
Effective 1 February, one or more northern California suppliers raised their prices from $300 fob to $315 fob for PG 64-10 and PG 64-16 (replacement grades for AR-4000 and AR-8000). Crude price strength was reported to be the main reason behind the price increase. One northern California supplier stated that asphalt supply was not an issue in the state, as strong asphalt prices had given local suppliers an incentive to stay in asphalt production.
Bakersfield-area (central California) prices were reported to be around the $300 fob level. With one local refiner redirecting a portion of its resid to a coker, asphalt production is down in central California and prices have remained relatively firm.
Effective 1 February, one ore more southern California suppliers raised their prices for various grades up by $15, taking base grade PG 64-10 to $325 fob. PG 64-16 moved up to $330, and PG 70-10 moved to $335.
Canada
commentary
The western Canadian market remained relatively quiet last week. Bidding
activity was limited and winter weather conditions kept liftings from
materializing at stationary plants.
Last quotes heard from Alberta were at C$320 fob the closest supply source for Pen 150-200 asphalt. The job will pave in the 2006 paving season. Last prices heard in British Columbia were at C$380 fob the closest supply source for Pen 150-200.
Eastern Canadian marketers reported no changes in retail prices as most terminals are closed for the winter. Opening season prices will probably be heard sometime in late March or early April. Marketers anticipate that if crude prices remain at the current level, prices will not open up at last year's level. Higher wholesale import prices from the Midwest will also have an impact on eastern Canadian retail prices.
Last December, the Quebec market was at C$257-262/t fob for PG 58-28, while the Toronto, Ontario market was at C$270-285/t fob for PG 58-28.
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