New York, 7 August (Argus)
Singapore
One industry player says that China is affecting everything with the bad weather and high stocks continuing to dampen demand. But prices are fairly resistant as they are still sitting in the $280-290/t range for fob bulk cargoes, although some participants are hearing offers at a $10/t discount to the lower end of this range. A source reported hearing that the 3,800t carrying capacity Bitumen Express owned by Hin Hin was recently undergoing maintenance work.
High sulphur fuel oil prices were lifted higher amid increased buying support in Singapore spot trade. A Singapore-based trader followed up its buying spree on 2 August and bought 20,000t of 180cst HSFO at mops -$6/t for loading on 18-22 August. The trader had bought three cargoes totalling 60,000t of 180cst HSFO at mops -$8/t and mops -$7.50/t the previous day. Market fundamentals remain weak, underpinned by record high stockpiles of fuel oil in Singapore. Official port statistics recorded residual fuel oil stocks at 15mn bl, up by 1.13mn bl from the previous week. Export outlets remain scarce, except for a few term delivery options.
Malaysia
No significant changes were seen in the Malaysian market this week. A large end user was offered 1020 ringgit/t ($278/t) by Petronas, 1045 ringgit/t by Exxon and 1049/t ringgit by Caltex. There is still no official word on the allocation of funding to new construction projects and so the market remains quiet.
Thailand
A large Thai seller insists that they sold a 3,000t cargo to China this week for about $290/t fob. The same seller thinks that the price will go down because they are above the Singapore price.
South Korea
South Korean refiner SK will have no spot cargoes for August although one or two should be available for September. SK also stated that they have had problems with delivery dates being delayed due to the bad weather and lack of storage space in China. But this was only with one or two cargoes and the delays were only one or two weeks according to SK.
Prices remained stable on a fob basis at about $300/t for SK. S-oil are happy to sell at a premium as they have less pressure to shift volume. S-oil said $300/t is too low for them. S-oil has completed deals for 15,000t for August delivery. It was reported that the South Korean market should soon start to pick up as domestic demand increases.
Taiwan
August cargoes from Simosa are probably sold out, amounting to about 10,000t. The price was said to be a little lower than for July. But Simosa’s price is still above $315/t fob. CPC will issue a tender next week for 100,000t on term contract for delivery between August and December. They hope to conclude a deal before the end of August. It was also reported that CPC would have the same volume available on a spot basis during this time. The current CPC price for August delivery was said to be $280/t fob.
China
End-user demand is much lower than was predicted by forecasts earlier in the year. Those expectations drove a period of heavy buying and rising prices over the winter. This left inventories very high which means that Chinese demand in total is weak because construction projects are not using up the inventories and there is nowhere to store new cargoes. Although the weather has been extremely bad over the past month, other factors could be affecting projects. China is in the first year of a new five year plan which typically means a slowdown as projects and finances are reorganised. The government might be acting to slow down GDP growth which was much higher than their targets for the first half of this year. For the first six months of 2006, GDP growth was 11.3pc while the target in the five year plan was 7.5pc.
A Japanese trader based in China estimated current cfr prices in to east China were at $345/t. Another regular importer reported being offered $350/t cfr into east China but could not buy becasue of lack of storage space. Other offers into east China were being made at $350-360/t according to another buyer in China. It was reported that contracts signed earlier in the year at higher prices were being broken by end users who were now being offered lower prices.
Government figures were released for production and export for June. Production in China was up by 16pc year on year from 912,500t in 2005 to 1.06mn t in 2006. Between January-June, production rose by 44pc year on year from 4.07mn t to 5.88mn t. Imports between January-June were 1.8mn t for 2006. Total imports for 2005 were 3.18mn t. June imports were 380,000 tons with almost half from South Korea.
Domestic prices are still being squeezed. South Korean giant SK’s agents, based in China, are reported to be offering 3,700 yuan/t ($464/t) compared to a month ago when offers of above Yn4,000/t were common. CNOOC Taizhou refinery in Jiangsu completed deals at Yn3,600/t. Local traders expect prices to rise in the second half of August. Independent Dongming in Shandong offered at Yn3,750/t, an increase of Yn50/t. An official at the refinery said the current demand in Shandong was stable. CNOOC Daxie in Zhejiang continued to offer at Yn3,750/t hearing some sales were made at a discount of Yn20-50/t. Sources said Zhenhai refinery sold some cargoes at Yn3,650/t although posted prices at the refinery were at Yn3,750/t. Although CNOOC Binzhou continued to offer at Yn4,150/t, the real selling price has come down by Yn200/t since early July to Yn3,600-3,700/t. Traders said prices were under pressure as higher inventories and the rain postponed some projects' start-up. Jinzhou refinery held its offer at Yn4,150/t but some real deals could be done at a discount of Yn150/t on an ex-refinery basis, a Yn50/t decrease since mid-July.
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