New York, 27 June (Argus) — Crude prices hit new record highs on both sides of the Atlantic last week as demand for products spurred fears of a downstream supply crunch this winter. Front-month Nymex WTI futures touched $60/bl for the first time at the end of last week.
Asphalt prices across the US are higher than at the same time last year. Since states have limited budgets, these higher prices could result in fewer miles of roads being paved in certain states, especially if commercial paving activity is flat or lower than last year. Some US examples of higher prices in June of this year compared to the same time last year are: 27pc increase in south Texas, 9pc increase in north New Jersey/NYC metro area, and a 13pc increase in southern California.
Even though asphalt prices are higher than last year, it is important to note that they have still not kept up with the increase in crude oil prices. In early June 2005, WTI prices were 38pc higher than the same time last year, but by the end of last week, WTI prices hit new highs taking the increase to over 50pc over the same time last year.
The big news in the western Canadian market had to do with rack price changes. One supplier raised its rack prices for all asphalt grades by C$21, effective Friday, 24 June. Another western Canadian supplier announced that it would be raising its rack prices by C$21, effective on Monday, 27 June. Both changes were due to crude price strength and the narrowing light-heavy crude price spreads.
East
coast commentary
There were no new
wholesale transactions heard in the East coast market. Buyers and suppliers
stated that the next wholesale transactions for PG 64-22 would most likely take
place at around $180 fob or higher, especially with crude prices moving to last
week’s new highs.
One New Jersey refiner stated that it was highly unlikely that it would sell wholesale asphalt this year. The supplier stated that its East coast system was currently in balance, but it might become a wholesale buyer down the road.
One New Jersey refiner reported that its coker went down on Tuesday of last week (21 June), and was at half rate by the end of the week. The refiner expected the coker to be at full capacity by 28 June. The supplier believed that there was no additional asphalt production as a result of the coker being down.
Retail prices were mostly stable across the state with some adjustments in a few markets.
In Massachusetts, retail prices for PG 64-28 were holding at $218-225 fob range, while in southern Connecticut, PG 64-28 retail prices were at $215-222 fob, exclusive of the gross receipts tax (5.25pc).
Last week, one western New York supplier increased its prices from $190 to $200. One supplier raised its western Pennsylvania prices up by $5 from $190 to $195 fob, effective last week.
The southern New Jersey/Philadelphia market was reported to be in a broad range of $195-215 fob for PG 64-22. One marketer felt that the bulk of the market was at $205 fob.
The rest of New Jersey to North Carolina was in the $200-215 fob range. One supplier stated that it did not have many people at carryover prices, as it believed its competitor did. Another supplier reported coastal North Carolina prices to be in the $185-205 fob range.
Atlanta, Georgia prices were at $200 or lower, according to one local player. Volumes moving from Chattanooga, Tennessee into the Atlanta market were priced at $185 fob, according to a Tennessee marketer.
One Jacksonville , Florida supplier had prices at $185-190 fob, while another was reported to be at $210 fob with no sales. In Tampa, one supplier reported prices at $175-200 band, while anther felt the market was at $193. Southern Florida prices were heard at around the $210 fob level.
Gulf
coast commentary
Even though crude
oil prices reached new highs last week, asphalt wholesale prices in the Gulf
coast did not see any major price adjustment. However, local refiners warned
that costs of production have gone up substantially, hence asphalt wholesale
prices will have move up accordingly. One supplier stated that it expected its
next sales to be at least $10 higher if not more. The supplier felt that if it
could not achieve the price it needed in the wholesale asphalt market, it would
not make sense to produce the asphalt barrels.
The Gulf coast wholesale market edged up slightly to $155-158 fob last week, from $155-156 fob in the prior week. A buyer confirmed that an eastern Gulf coast supplier was selling June wholesale volumes of PG 64-22 at the upper end of this range.
Another eastern Gulf coast supplier reported that it last sales were at $155-156 fob for PG 64-22 and PG 67-22. The supplier did not quote any new wholesale volumes last week.
There was limited wholesale availability from the western Gulf coast market. One western Gulf coast refiner has had no wholesale asphalt to sell in the open market, as it has been meeting the requirements of its own recently expanded retail system.
One Gulf coast wholesale participant commented that some local asphalt-producing refiners have had difficulty meeting the Florida “spot test” requirement. This has reduced the number of Gulf coast wholesale suppliers that can supply the Florida market.
One Gulf coast buyer reported that it was quoted a price of $165 fob from a Gulf coast refiner. The grade was PG 64-22 and the volume was to be delivered in the first half of July.
In southern Alabama, asphalt prices were reported to be around $195-200 for PG 67-22. One local participant reported that it would be raising its prices in July by $10-15 to the $210-215 fob range.
Selling prices in southern Louisiana were reported to be at $185 fob for PG 64-22. At recent lettings, some work has been taken in the $190-195 fob range. Current market prices for polymer PG 76-22 were reported to be at $285 fob, with recent quotes at lettings reported to be at $5 more.
The southern Texas market had price ranging from $205-230 fob, with the lower end applying to work on the books and the upper end of recent quotes at the last letting. Some PG 64-22 volumes have been signed up at the $220-230 fob.
New Mexico prices were reported to be in the $185-190 fob range. Demand in the state is expected to be flat compared to last year.
Midwest
commentary
Last week’s increase in crude oil prices to new highs forced several Midwest refiners to review their costs of producing asphalt. One of these refiners’ had
wholesale volumes available, but decided to stay out of the market until it had
reviewed its economics to make wholesale asphalt.
Wholesale barge transactions were reported by one buyer to be in the high $140s to low $150s for PG 64-22. The buyer reported completing a barge deal in this range over a week ago.
One refiner reported its transactions in the $140-145 fob range for PG 64-22. The supplier stated that it would be moving up to $150 fob for July wholesale volumes. Another Midwest wholesale supplier’s quotes were heard at $155-160 fob for July.
One buyer reported purchasing on-spec wholesale asphalt for June loading at $125 fob. This volume was not available by barge or by rail, only by truck.
By the middle of last week, a Midwest refiner had notified its customers that it was raising its asphalt prices by $5-10. The supplier stated that another increase was possible due to the strength in crude oil prices. This increase was made to its reference pricing and its level of new quotes in this market.
At the 16 June letting in Nebraska, asphalt quotes in the Omaha market were heard at around $195-200 fob, which was around $10-15 higher than the prior letting. There were no quotes heard from central section of the state because most of the volume on this particular letting was modified work. Last quotes heard from central Nebraska were at $185 fob, or at $165 fob Wyoming.
The Chicago market was reported to be at $140-150 fob, by one local player. The St. Louis, Missouri market was at $165-170 fob.
One supplier raised its central Illinois prices by $5-10 to from $175-185 to $185-190 fob. Another central Illinois participant reported prices at $170-175 fob. The supplier reported that it quoted these higher prices at the last Illinois letting and was unable to take any work at the new prices.
Minneapolis/St. Paul, Minnesota prices were also reported to be at $140-150 fob. One local player stated that this was the price range for carryover work from last year that was extended for volumes moving through June. The player stated that effective 1 July, it was increasing its price to $180 fob in this market.
Northwest Indiana prices were unchanged at $145-155 fob. One supplier raised its Indianapolis, Indiana price from $180 to $185 fob. Northeast Indiana prices were at taken up $10 to $175 fob for PG 64-22.
One Detroit, Michigan supplier raised its prices by $10 to $185 fob. Toledo, Ohio prices were heard at $170-175 fob. In northern Kentucky, prices were increased by $10 to the $190 fob level for PG 64-22. The Kentucky supplier reported that it quoted the higher prices at the last Kentucky letting and was unable to take any work at that level.
Rocky
Mountain & west coast commentary
A Rocky Mountain wholesale supplier that had been offering wholesale rail
volumes at $125 fob reported that it its economics were forcing a price a
closer to the $130-135 fob level for PG 64-22. The refiner stated that if had
very little additional asphalt to offer at this time. The main reason for the
price increase was the higher cost of production due to rising crude oil prices
and the narrowing light-heavy crude oil price spreads.
Retail asphalt quotes are on the rise in Wyoming and Colorado. One supplier stated that it was now quoting $180 fob its refinery. However, the supplier opined that most of the work for the 2005 season is already on the books, and there are very few new volumes being tendered for this year. The supplier stated that the $180 fob price will most likely apply to anything new that is bid this year for next year’s paving.
One supplier stated that most of the work in Colorado and Wyoming for paving in the 2005 season is at the $160-165 fob level for PG 64-22.
Demand in Wyoming and Colorado has been fair for 2005. State work is expected to be down compared to last year, but commercial paving jobs have been higher than last year.
PG 64-22 and PG 70-22 prices in the Portland, Oregon market were at $185 fob. One local supplier commented that typically PG 70-22 would have a $10 premium to PG 64-22 in this market. There is some PG 70-22 work on the books at $195 fob, but stiff competition caused the day-to-day pricing to slip to $185 fob. Just a couple of months ago quotes were as high as $205 fob for PG 70-22 in this market.
PG 64-28 is at around $200 fob in Portland, Oregon. However, central Oregon has higher prices of around $215-225 fob due to the freight differential to Portland. PG 70-28 was reported to be at $225-250 fob in Oregon, with the lower end applying to volumes without polymer and the upper end to volumes with polymer. One marketer commented that when the agency specs have elastic recovery specs, then polymer addition is required.
Oregon demand is up by around 10pc compared to last year. State demand has been stagnant, but commercial demand is very strong in the state.
In southern California, AR-4000 and AR-8000 prices were in the $200-210 fob range. Northern California prices were heard in the $200 level, while central California prices were around $185-195 fob.
Phoenix, Arizona prices were at $195-200 fob for PG 70-10. Arizona demand is expected to be very strong this year, with surging commercial demand reported to be the main reason.
Canada
commentary
After a few weeks of dynamic price changes, the eastern Canadian asphalt market
appeared to have settled last week. In Montreal, Quebec prices were heard at
the C$255-265 fob level for PG 58-28, while in the Toronto, Ontario market
prices were heard at around C$265-275 fob.
In Montreal, Quebec, PG 64-28 was reported to have a C$22 premium over PG 58-28. Polymer grades, PG 58-34 and PG 64-34, were reported to have C$52 and C$115 premiums over PG 58-28, respectively. PG 70-28 had a C$115 premium over PG 58-28.
The big news in the western Canadian market had to do with rack price changes. One supplier raised its rack prices for all asphalt grades by C$21, effective Friday, 24 June. Another western Canadian supplier announced that it would be raising its rack prices by C$21, effective on Monday, 27 June. These price increases were reported to be due to higher crude oil prices and the narrowing light-heavy crude oil price spread.
When both suppliers’ rack prices go into effect, Argus estimates that the rack prices in Winnipeg will be at C$336, Kamloops at C$341, Edmonton at C$296, Vancouver at C$336, and Prince George at C$351.
Prior to this, the last rack price changes in western Canada were on 23 March, 2005. At that time, one western Canadian marketer raised its prices at two locations, taking Kamloops up by C$6 and Winnipeg up by C$12.
Last week the WTI to Lloyd Blend differential slipped from $14.09/bl in the prior week to $13.91 last week. This compared to a wider differential of over $23/bl back in March of this year. The narrower this differential, the higher the costs of asphalt production for local refiners.
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