Tight supply boosts Malaysia bitumen tank truck prices

Prices to ship bitumen by truck from Singapore to Malaysia have doubled in the last three months, as the lifting of Covid-19 lockdowns boosts demand while supply stays tight.

Tank truck prices rose to $415-420/t ex-refinery in the week ending 10 July, after falling to a 3½-year low of $200-210/t in the week ending 3 April. Prices have risen every week from $235-240/t ex-refinery in the last week of May, aside from holding steady in the week to 26 June.

The Singapore tank truck prices are at a premium of $95/t to fob Singapore prices, which Argus assessed at $320-325/t in the week ending 10 July. Tank trucks typically carry around 25-30/t of bitumen each.

The sharp rise in tank truck prices has been supported by regional supply tightness, after bitumen output fell because of the Covid-19 outbreak. Construction activity stalled during the coronavirus lockdowns, while refinery run rates were lowered to tackle a supply overhang.

SPC, the Singapore-based subsidiary of Chinese state-controlled energy firm PetroChina, cut bitumen production from its 290,000 b/d Jurong refinery by about 30pc in May. Truck supplies to Malaysia were also cut during the period after Kuala Lumpur imposed a movement control order (MCO) to curb the spread of the virus.

Regional demand for bitumen has since recovered, with road contractors hoping to make up for the Covid-19 related disruptions. But supplies from Singapore and Malaysia have struggled to keep pace.

State-owned Petronas cut bitumen output at its 270,000 b/d Malacca refinery complex by at least 40pc in May, when the MCO brought the construction industry to a standstill. It sought to export cargoes in April and June, leaving it short of supply when domestic demand unexpectedly surged from the end of May.

Petronas is also facing tighter availability of heavy crude, which is likely to prompt it to run lighter crude grades at the Malacca refinery, leading to off-specification bitumen output just as demand is rising.

Malaysian businesses staged a quicker-than-expected recovery from the lockdown after the Hari Raya Puasa holiday on 24 May, forcing Petronas to scramble to meet the supply gap. The company raised its bitumen prices for five straight weeks to 1,800-1,900 ringgit ($421-445/t) ex-refinery in the week that ended 26 June from its year lows of 1,150-1,200 ringgit/t ex-refinery in the week ending 15 May.

Term buyers from ExxonMobil have also been reporting shortages since mid-May. The company's Singapore refining complex has stopped producing bitumen and will have no availability until the end of this year, possibly because of run cuts, buyers said. ExxonMobil declined to comment.

ExxonMobil produces 100,000-120,000 t/month of bitumen in Singapore, making up the bulk of bitumen supplies in the region. Singapore exported 2.5mn t of bitumen in 2019.

Tank truck lifters have fewer supply alternatives in Malaysia and Singapore, with private-sector Malaysian refinery Kemaman Bitumen (KBC) unable to meet the strong demand. Most of the refinery's 30,000 b/d supplies are committed under term deals, limiting spot availability.

By Liz Ng