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The peak season in the second half of the year, asphalt prices are expected to rebound at low levels
2023/7/5
Shortage of raw materials, price performance is strong
In the second quarter of this year, due to the tightening of customs policies, diluted asphalt customs clearance significantly reduced, resulting in a tight supply of raw materials for producers, some companies therefore reduce production or even stop production, which is the main reason why the price of asphalt performance since April compared to the firm crude oil.
Diluted asphalt to natural asphalt as the basic component, mixed with mineral tar and other components of asphalt mixture, is an important raw material composition of domestic asphalt, accounting for about 53%. Imports of diluted asphalt without crude oil quota, is a good choice of raw materials for many local refining companies without crude oil import quotas. According to the FTA between China and ASEAN, diluted asphalt originating from ASEAN is not subject to 8% tariff. In addition, due to U.S. sanctions, Marek crude oil and Iranian crude oil is often exported to China in the name of diluted asphalt through Malaysia, so currently the main source of imports of diluted asphalt in China is Malaysia. In terms of import volume, the annual import volume of diluted asphalt in 2022 is 23.71 million tons, an increase of 4.44 million tons or 23.04% over 2021.
As some of the crude oil entered the customs in the name of diluted asphalt, disrupting the policy of quota imports in the crude oil market. In response to this problem, Customs re-adjusted the standards of the asphalt industry, the provisions of 360 ℃ distillation residue less than 40%, 360 ℃ distillation residue needle penetration is not greater than 400%, making some of the diluted asphalt customs clearance is blocked. since April, the import clearance of diluted asphalt slowed down significantly. Data show that in the first quarter, the import of diluted asphalt nearly 4.2 million tons, the average monthly import volume of nearly 1.4 million tons; April diluted asphalt imports fell to 120,000 tons, less than 240,000 tons in May, significantly lower than the level of imports before March. As a result, the diluted asphalt port inventory fell from 1.727 million tons at the beginning of the year to 1.07 million tons at the end of June, down 38.04%, while the diluted asphalt premium rose from -$28 / barrel at the beginning of the year all the way to a maximum of -$15 / barrel. Tight raw materials and rising premiums significantly eroded the profits of asphalt producers, and even some asphalt producers due to shortages of raw materials and production shutdown, which is more affected by local refining. Data show that in May and June, the actual production of local refining than the scheduled production of more than 15% drop respectively.
In June, we conducted field research on several local refineries and learned from the research that one company that used imported diluted asphalt for all raw materials stopped production in June, mainly due to the lack of crude oil import quotas and shortage of imported diluted asphalt. Another local refining enterprises without crude oil import quotas, due to the lack of raw materials, diluted asphalt in June to maintain low production. There is another enterprise that has crude oil import quota, but the plant is in annual overhaul period and is expected to restart in July, and has already pre-sold about 400,000 tons of asphalt production in August-September, the enterprise is not affected by the shortage of raw materials. In addition, there are some refineries that can use fuel oil for production instead of diluted bitumen, but the bitumen yield will drop to 30%, which is lower than the 60% bitumen yield of Mare crude. Overall, the import clearance of diluted asphalt is blocked for local refiners without crude oil quotas, resulting in a decline in domestic asphalt production while raising the price of diluted asphalt, which has a positive impact on the asphalt market.
Since May, there have been various rumors about the customs clearance of diluted asphalt in the market. During the research process, companies generally expect the customs clearance problem to be solved by the end of June, but so far there is no clear official news. From the relevant information company statistics, the total planned domestic asphalt production in July is 2,984,000 tons, an increase of 278,000 tons or 10.3%, the raw material problem may be solved in July. Once the problem of diluted asphalt clearance is resolved, meaning that the supply of asphalt will pick up in the aftermarket, the market will face a wave of downward pressure. This Monday, the decline in asphalt prices is the market fluctuations around diluted asphalt import clearance expectations.
The whole year before the low and then high when the current north is strong south weak
Asphalt demand is mainly concentrated in the infrastructure industry, of which 76% for road construction and 16% for waterproofing materials. Therefore, asphalt is influenced by the infrastructure and real estate industries in addition to weather effects such as temperature and rainfall. In general, the first half of the northern warming late, the southern rainfall, asphalt demand tends to be weak; after the second half of the southern rainy season, combined with the concentration of funds in place, conducive to road construction, demand will mostly be better than the first half. Correspondingly, the trend of asphalt inventories show a rise in the first half, the second half of the seasonal characteristics of the decline.
At present, the domestic asphalt supply and demand side has obvious characteristics of strong north and weak south. Specifically, North China to the weather is mainly sunny and hot, suitable for carrying out construction, so the northern region asphalt demand is better, but the northern ground refining raw materials in the early stages of the impact of diluted asphalt into the customs blocked, refinery row production overall low, the order delivery volume is affected. Therefore, the overall inventory level of asphalt in the northern region is at a low level, the price is relatively firm. East China is affected by rain, demand is light, supply due to the increase in the main refinery scheduling and rising, the overall shipping pressure, refinery inventory levels rose. Overall, the regional supply and demand for asphalt diverged significantly.
The first half of this year, the overall domestic demand for chemicals is less than expected, the second half of the market is generally looking forward to the economic recovery brought about by a rebound in consumption. For the asphalt market, after July, the market will gradually enter the seasonal peak consumption season, demand is expected to improve the stronger than the ring. At the same time, the policy support is also worthy of attention.
We learned in the market research, the early companies mainly do waterproofing contracts, but the southern rainy season led to waterproofing demand into the off-season, coupled with the impact of the real estate market, the performance of infrastructure investment is less than expected. According to feedback from relevant enterprises, the northwest and southwest highway projects significantly reduced, the first half of the overall weak demand for heavy traffic asphalt. In addition, poor consumption has also affected the willingness of traders to stock up. There are also companies reflected that this year, the circulation link poor willingness to hoard, and in previous years, the same period traders to increase the booking operation of the refinery plant goods, compared to this year, many companies tend to advance the social inventory to return to the capital. According to trader feedback, the early shortage of raw materials, refinery asphalt resources supply is low, but the downstream demand is poor, asphalt transport vehicles idle more, supply and demand are both weak.
For post-market demand expectations, refineries generally hold a biased view. Demand in the first half of the year is too weak, the second half of the peak season, demand for ringgit improvement is expected to be stronger, coupled with the refinery inventory neutral low, demand to start when there is an upside drive in asphalt prices. However, in the course of our research, some traders are not very optimistic about the demand outlook for the second half of the year, or mainly worried about the lack of funds for downstream projects.
Short-term pressure is obvious medium-term trend to the good
The first half of this year, asphalt prices oscillate between 3500-4000 yuan / ton, mainly by the drag of falling international crude oil prices, for example, April-May, Brent crude oil fell from $ 86 / barrel to $ 71 / barrel, the cost of asphalt brought about 600 yuan / ton of downward movement. On Monday, asphalt futures main 2310 contract once below the 3500 yuan / ton mark. On Tuesday, asphalt futures main 2310 contract began to rebound. From the current trend of asphalt, 3500 yuan / ton integer mark is an important support level during the year.
In the short term, the pace of diluted asphalt clearance is the key, once the supply of raw materials to resume, asphalt scheduling increased, the short-term will cause some impact on asphalt prices. However, in the diluted asphalt customs clearance problem is resolved before the supply of raw materials remain variable.
In the second quarter of this year, due to the tightening of customs policies, diluted asphalt customs clearance significantly reduced, resulting in a tight supply of raw materials for producers, some companies therefore reduce production or even stop production, which is the main reason why the price of asphalt performance since April compared to the firm crude oil.
Diluted asphalt to natural asphalt as the basic component, mixed with mineral tar and other components of asphalt mixture, is an important raw material composition of domestic asphalt, accounting for about 53%. Imports of diluted asphalt without crude oil quota, is a good choice of raw materials for many local refining companies without crude oil import quotas. According to the FTA between China and ASEAN, diluted asphalt originating from ASEAN is not subject to 8% tariff. In addition, due to U.S. sanctions, Marek crude oil and Iranian crude oil is often exported to China in the name of diluted asphalt through Malaysia, so currently the main source of imports of diluted asphalt in China is Malaysia. In terms of import volume, the annual import volume of diluted asphalt in 2022 is 23.71 million tons, an increase of 4.44 million tons or 23.04% over 2021.
As some of the crude oil entered the customs in the name of diluted asphalt, disrupting the policy of quota imports in the crude oil market. In response to this problem, Customs re-adjusted the standards of the asphalt industry, the provisions of 360 ℃ distillation residue less than 40%, 360 ℃ distillation residue needle penetration is not greater than 400%, making some of the diluted asphalt customs clearance is blocked. since April, the import clearance of diluted asphalt slowed down significantly. Data show that in the first quarter, the import of diluted asphalt nearly 4.2 million tons, the average monthly import volume of nearly 1.4 million tons; April diluted asphalt imports fell to 120,000 tons, less than 240,000 tons in May, significantly lower than the level of imports before March. As a result, the diluted asphalt port inventory fell from 1.727 million tons at the beginning of the year to 1.07 million tons at the end of June, down 38.04%, while the diluted asphalt premium rose from -$28 / barrel at the beginning of the year all the way to a maximum of -$15 / barrel. Tight raw materials and rising premiums significantly eroded the profits of asphalt producers, and even some asphalt producers due to shortages of raw materials and production shutdown, which is more affected by local refining. Data show that in May and June, the actual production of local refining than the scheduled production of more than 15% drop respectively.
In June, we conducted field research on several local refineries and learned from the research that one company that used imported diluted asphalt for all raw materials stopped production in June, mainly due to the lack of crude oil import quotas and shortage of imported diluted asphalt. Another local refining enterprises without crude oil import quotas, due to the lack of raw materials, diluted asphalt in June to maintain low production. There is another enterprise that has crude oil import quota, but the plant is in annual overhaul period and is expected to restart in July, and has already pre-sold about 400,000 tons of asphalt production in August-September, the enterprise is not affected by the shortage of raw materials. In addition, there are some refineries that can use fuel oil for production instead of diluted bitumen, but the bitumen yield will drop to 30%, which is lower than the 60% bitumen yield of Mare crude. Overall, the import clearance of diluted asphalt is blocked for local refiners without crude oil quotas, resulting in a decline in domestic asphalt production while raising the price of diluted asphalt, which has a positive impact on the asphalt market.
Since May, there have been various rumors about the customs clearance of diluted asphalt in the market. During the research process, companies generally expect the customs clearance problem to be solved by the end of June, but so far there is no clear official news. From the relevant information company statistics, the total planned domestic asphalt production in July is 2,984,000 tons, an increase of 278,000 tons or 10.3%, the raw material problem may be solved in July. Once the problem of diluted asphalt clearance is resolved, meaning that the supply of asphalt will pick up in the aftermarket, the market will face a wave of downward pressure. This Monday, the decline in asphalt prices is the market fluctuations around diluted asphalt import clearance expectations.
The whole year before the low and then high when the current north is strong south weak
Asphalt demand is mainly concentrated in the infrastructure industry, of which 76% for road construction and 16% for waterproofing materials. Therefore, asphalt is influenced by the infrastructure and real estate industries in addition to weather effects such as temperature and rainfall. In general, the first half of the northern warming late, the southern rainfall, asphalt demand tends to be weak; after the second half of the southern rainy season, combined with the concentration of funds in place, conducive to road construction, demand will mostly be better than the first half. Correspondingly, the trend of asphalt inventories show a rise in the first half, the second half of the seasonal characteristics of the decline.
At present, the domestic asphalt supply and demand side has obvious characteristics of strong north and weak south. Specifically, North China to the weather is mainly sunny and hot, suitable for carrying out construction, so the northern region asphalt demand is better, but the northern ground refining raw materials in the early stages of the impact of diluted asphalt into the customs blocked, refinery row production overall low, the order delivery volume is affected. Therefore, the overall inventory level of asphalt in the northern region is at a low level, the price is relatively firm. East China is affected by rain, demand is light, supply due to the increase in the main refinery scheduling and rising, the overall shipping pressure, refinery inventory levels rose. Overall, the regional supply and demand for asphalt diverged significantly.
The first half of this year, the overall domestic demand for chemicals is less than expected, the second half of the market is generally looking forward to the economic recovery brought about by a rebound in consumption. For the asphalt market, after July, the market will gradually enter the seasonal peak consumption season, demand is expected to improve the stronger than the ring. At the same time, the policy support is also worthy of attention.
We learned in the market research, the early companies mainly do waterproofing contracts, but the southern rainy season led to waterproofing demand into the off-season, coupled with the impact of the real estate market, the performance of infrastructure investment is less than expected. According to feedback from relevant enterprises, the northwest and southwest highway projects significantly reduced, the first half of the overall weak demand for heavy traffic asphalt. In addition, poor consumption has also affected the willingness of traders to stock up. There are also companies reflected that this year, the circulation link poor willingness to hoard, and in previous years, the same period traders to increase the booking operation of the refinery plant goods, compared to this year, many companies tend to advance the social inventory to return to the capital. According to trader feedback, the early shortage of raw materials, refinery asphalt resources supply is low, but the downstream demand is poor, asphalt transport vehicles idle more, supply and demand are both weak.
For post-market demand expectations, refineries generally hold a biased view. Demand in the first half of the year is too weak, the second half of the peak season, demand for ringgit improvement is expected to be stronger, coupled with the refinery inventory neutral low, demand to start when there is an upside drive in asphalt prices. However, in the course of our research, some traders are not very optimistic about the demand outlook for the second half of the year, or mainly worried about the lack of funds for downstream projects.
Short-term pressure is obvious medium-term trend to the good
The first half of this year, asphalt prices oscillate between 3500-4000 yuan / ton, mainly by the drag of falling international crude oil prices, for example, April-May, Brent crude oil fell from $ 86 / barrel to $ 71 / barrel, the cost of asphalt brought about 600 yuan / ton of downward movement. On Monday, asphalt futures main 2310 contract once below the 3500 yuan / ton mark. On Tuesday, asphalt futures main 2310 contract began to rebound. From the current trend of asphalt, 3500 yuan / ton integer mark is an important support level during the year.
In the short term, the pace of diluted asphalt clearance is the key, once the supply of raw materials to resume, asphalt scheduling increased, the short-term will cause some impact on asphalt prices. However, in the diluted asphalt customs clearance problem is resolved before the supply of raw materials remain variable.
In the medium term, the current combined volume of asphalt community and plant storage year-on-year neutral high, if the problem of raw material customs clearance is resolved, in the context of the southern demand off-season, asphalt cracking profits may be under pressure in the short term downward, continue to grind the road. However, demand is expected to pick up after the rainy season, combined with the seasonal performance in previous years, asphalt demand in the second half of the year is expected to improve compared to the first half. Therefore, asphalt will have some short-term negative disturbance, but after the release of the negative, with the arrival of the peak season in the second half of the year, asphalt prices are expected to rebound from low levels.
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