Asian bitumen prices moved up slightly as refiners continued to try and pass on higher production costs, spurred by continued strength in crude and fuel oil prices.
Singapore commentary
Singapore sellers offered cargoes at around $170/t. Refiners running a lighter
crude slate and maximising fuel oil had less asphalt to place, but the lack of
buying interest from key buyers and Vietnam and Bangladesh both limited the
upside.
China
commentary
Mixed reports were heard about Chinese interest, with some traders saying that
Chinese buyers were willing to pay over $200/t on an fob Singapore basis while
others cautioned that China was not taking as much as could have been expected.
These more pessimistic industry sources pointed out that China was slowing down on asphalt imports, just as it has on other oil products, in a bid
to slow down the economy.
There were a couple of deals heard into China this week at over $200/t on a delivered basis, but these were for smaller cargoes of 2200 and 2300t respectively into south China. The seller was thought to have redeployed a vessel that it had on term charter that it typically used to supply Vietnam into south China instead. Sellers generally asked between $205 and $208/t for such cargoes.
The start-up of a 1.2mn t/yr coker at Sinopec’s 360,000 b/d Maoming refinery in China is expected to cut domestic asphalt production from the refinery. The unit is expected to start up in December 2005. Already Chinese domestic production of asphalt is lower because of lower run rates as refiners faced with the continual eroding of refinery margins by the low domestic prices versus crude costs cut output to minimise losses.
Runs at Sinopec’s 360,000 b/d Maoming refinery — China’s largest — will be trimmed by 3.5pc in July compared with June.
South
Korea
commentary
South Korean refiner SK continued to cite no spot availability in July, and
expected to meet only term cargoes. Some industry participants suggested that
the refiner was cutting back on asphalt to produce more short residue, which
can be converted into bunker fuel. A 1,200 cst cargo was thought to have been
sold by the refiner to a Japanese trader who will bring the cargo to Singapore. The selling price of the short residue is thought to be around a $12/t discount
to Singapore spot quotes, more attractive than asphalt prices at present.
Korean refiners, like their north Asian counterparts, are also considering run cuts by August and September, further reducing the amount of asphalt that will be available. This is because although these refineries have been the main beneficiaries of the surge in China’s product imports in recent years because of geographical proximity, they have been undermined by a fall in China’s oil product imports this year. Chinese imports of products from South Korea plummeted by 18pc in January-May, down from a year earlier, to just 178,000 b/d. The drop is part of a 40pc fall in total Chinese products imports to 420,000 b/d over the period.
Taiwan commentary
Taiwanese suppliers also pegged their prices close to Singapore spot quotes. CPC Taiwan said that while it was expecting to have a slight increase in
production in July, this would only ease the pressure it had in meeting term
commitments and would not result in the availability of spot cargoes. Fellow
refiner Simosa pegged its offer even higher, at $175/t, on the current squeeze
in the Taiwanese market. It did expect however to have a 4,000t spot cargo
available this month. Production this month from Simosa is around 30,000.
Some speculation was heard that Taiwan could actually have to import cargoes in the period between August and first-half October because of a spate of shutdowns at the CPC refinery. The cargoes were likely to be imported by private traders and not the refinery itself. Among the shutdowns tentatively scheduled were the closure for maintenance of the No 2 vacuum gasoil unit for 42 days from August 16, the shutdown of a fluid catalytic cracker for the same period and the No.5 straight run unit for 40 days from 20 August.
The topping unit No. 6 will be closed for 30 days from 15 July, while the No.7 HDS unit will be closed for 30 days from 1 July. The No. 1 vacuum gasoil unit will be closed for 35 days from 8 July.
The shutdowns come on top of a fire that shut down the No. 3 naphtha cracker 1 July. The unit is expected to stay down until August. The closure of the unit has affected the production of asphalt slightly because it has required a cut in the crude run and inflated the cost of producing asphalt slightly, say refining sources.
Malaysia commentary
Suppliers into Malaysia, both domestic and from Singapore appeared to have
reached an agreement to present a uniform, slightly higher price instead of
undercutting each other. The impetus came from a need to pass on costs to
consumers. There was also the lack of pressure to place as much as possible
into the Malaysian market because of oversupply, as has been the case in the
past. Prices were around 700 Malaysian ringgit/t for delivery into the Klang Valley.
Thailand
Refiners in Thailand’s Rayong province have been forced to cut back production by 40pc on average as a drought-induced severe water shortage continues to make an impact. Sellers are concentrating on supplying the domestic market, which is priced around $225/t at present and have little spot availability left.
Philippines commentary
No plans
for imports were heard at present because of the rainy season. Imports tend to
be concentrated around the first half of the year. Philippines typically
purchases through import tenders that are supplied from Taiwan.
Japan commentary
Japanese refiner Cosmo said that it was planning to export two cargoes in July,
both of which were headed into China. The first was set to lift on 16 or 17
July. The other 3,000t cargo of Pen 60/80 grade was expected to load at the
end of July. Plenty of enquiries were heard from China for additional cargoes,
but the refiner said it was reluctant to export more because domestic prices at
around $300/t were far more attractive. As a result, it was mulling whether it
should completely cut back on exports in August and concentrate on the domestic
market instead.
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