Singapore's bitumen export prices have reached record highs after widespread output cuts sharply reduced regional supply.
At least two major refiners in Singapore have declared force majeure on bitumen exports because of feedstock supply disruptions, notifying several contract buyers of reduced volumes. A third refiner is understood to have very limited spot availability for April-loading cargoes.
Offers for May-loading cargoes were also scarce, with feedstock shortages likely to persist because transits through the strait of Hormuz remain well below pre-conflict levels.
Singapore's daily ABX1 price surged to $700/t fob Singapore on 7 April, up by more than 88pc from pre-conflict levels. But discounts to 3.5pc 380cst high-sulphur fuel oil (HSFO) fob Singapore prices narrowed sharply.
The spread between the two products has narrowed to $17.25/t on 7 April, Argus data show. This shift may incentivise some Singapore-based refiners to raise bitumen output, but exports from Singapore are likely to stay limited in the near term.
Some market participants are sceptical that more attractive production margins relative to fuel oil alone would prompt refiners to increase bitumen output, given persistent shortages across the barrel. Refiners are still likely to prioritise production of gasoline, gasoil and bunkers where possible.
Some export cargoes from China have filled supply gaps in southeast Asia, with buyers in Vietnam and Thailand securing April-loading cargoes from refiners in south China. Some south China-origin cargoes were discussed and sold at around $670-680/t fob for April loadings, market sources said.
Buy-side resistance strengthens
While supply remains tight, buy-side resistance has grown on the back of rising raw material costs.
Some contractors in Vietnam and Indonesia may delay or halt roadwork projects because of funding constraints. Many government budgets were set before the conflict, when bitumen prices were significantly lower, and it remains unclear if governments will provide additional funding in the wake of current higher prices.
Many Vietnamese and Indonesian importers are also reluctant to commit to high-priced seaborne cargoes from Singapore, because current domestic trucked prices are lower. Bids and buying indications for April-loading cargoes from southeast Asian importers were largely capped at $660/t fob Singapore, on a netback basis.
Australian buyers may be better placed to secure Singapore export supplies as some contractors rush to finish projects before the winter lull, but many remain cautious. Most want to avoid building stocks at current high prices, wary that spot prices could correct sharply and leave them holding expensive inventories.
In the near term, government funding is expected to be mainly focused on more pressing issues, including providing subsidies for escalating transportation fuel costs, with infrastructure and roadwork projects given lower priority.
Funding constraints from higher raw material costs are not the only factor limiting demand.
The cost of gasoil, needed to operate trucks, heat tanks and run some machinery, has also surged since the start of the war, further adding to operating costs for contractors.
