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Loose supply makes it difficult for asphalt to go out of the trend upward market
2023/7/31
On the one hand, the subsequent strengthening of diesel will drive refinery profits to improve, and the operating rate will further increase; on the other hand, in the third quarter, combined with typical downstream indicators, the demand outlook is still not optimistic. On the whole, it is difficult for asphalt to go out of the trend upward market.
With the issuance of the third batch of non-state-owned crude oil usage quotas, diesel consumption will enter the seasonal peak season in the second half of the year, which will drive the start-up of the main atmospheric and vacuum operations. It is expected that the supply of asphalt will become more relaxed, while the demand side is still below expectations.
On the supply side, local refineries and main businesses will continue to maintain high production schedules. In terms of land refining, the problem of raw materials for asphalt refining is solved by passing the inspection and directly releasing them or classifying them as other heavy oils for customs clearance. Specifically, according to customs data, the import volume of asphalt mixture (diluted asphalt) in June was 1.077 million tons, an increase of 840,000 tons from the previous month, and the import volume of other heavy oil items was 293,200 tons, a substantial increase of 290,000 tons from the previous month (the import volume of other heavy oil items increased by 290,000 tons). Most of the volume is asphalt raw material). At the same time, the Platts shipping schedule for diluted bitumen to China in July began to resume. In addition, Venezuelan state oil company said it would increase crude oil production in August. In this context, refineries are more willing to resume asphalt production and increase load. According to the statistics of Cloud Asphalt, the asphalt refining schedule in August was 1.947 million tons, an increase of 279,000 tons from the previous month. In terms of main business, driven by the increase in Sinopec’s asphalt production, the main asphalt production in the first half of this year increased by 700,000 tons year-on-year, and the main business schedule in July and August continued to increase month-on-month. Overall, bitumen supply is expected to be looser.
On the demand side, typical downstream indicators and financial conditions are not optimistic. At present, according to the data of the Steel Union, the operating rates of demand samples in subdivided fields such as asphalt downstream road modified asphalt, construction asphalt, and waterproof modified asphalt are 13%, 21.5%, and 31.67%, respectively, which are 8 percentage points lower than the same period last year. 14 percent and 13 percent. At the same time, even if the demand for asphalt improves marginally in the third quarter, combined with the financial situation such as net financing of local government special bonds, the overall probability is lower than expected.
In terms of inventory, according to the statistics of Cloud Asphalt, the current social inventory of asphalt is still at a high level year-on-year. Although there have been continuous destocking recently, the destocking rate is relatively slow, and the spot market is still in a state of no shortage of spot goods. It is worth noting that some of the main refineries have accumulated pressure on asphalt due to the increase in the operating rate of atmospheric and vacuum. Therefore, the implementation of the price reduction promotion policy has formed a certain impact on the price of asphalt in the spot market.
The evaluation of bitumen valuation should be closely combined with the actual production situation. Although the cracking price difference between bitumen and Brent is at a historically low position, the cracking price difference between bitumen and diluted bitumen (including CIF discount) should be evaluated in combination with actual production raw materials. Recently, the CIF discount of diluted bitumen has loosened, falling from -15 USD/barrel to -16 USD/barrel. According to calculations, the current cracking price difference between asphalt and diluted asphalt (including discount) is still at a centrally high position. In the third quarter, as asphalt production remained at a high level, combined with the subsequent strengthening of diesel oil, the refinery profit improved. The operating rate of atmospheric and vacuum operations of the main and ground refineries is expected to further increase and maintain a high level. Strengthening, asphalt valuation will weaken accordingly.
With the issuance of the third batch of non-state-owned crude oil usage quotas, diesel consumption will enter the seasonal peak season in the second half of the year, which will drive the start-up of the main atmospheric and vacuum operations. It is expected that the supply of asphalt will become more relaxed, while the demand side is still below expectations.
On the supply side, local refineries and main businesses will continue to maintain high production schedules. In terms of land refining, the problem of raw materials for asphalt refining is solved by passing the inspection and directly releasing them or classifying them as other heavy oils for customs clearance. Specifically, according to customs data, the import volume of asphalt mixture (diluted asphalt) in June was 1.077 million tons, an increase of 840,000 tons from the previous month, and the import volume of other heavy oil items was 293,200 tons, a substantial increase of 290,000 tons from the previous month (the import volume of other heavy oil items increased by 290,000 tons). Most of the volume is asphalt raw material). At the same time, the Platts shipping schedule for diluted bitumen to China in July began to resume. In addition, Venezuelan state oil company said it would increase crude oil production in August. In this context, refineries are more willing to resume asphalt production and increase load. According to the statistics of Cloud Asphalt, the asphalt refining schedule in August was 1.947 million tons, an increase of 279,000 tons from the previous month. In terms of main business, driven by the increase in Sinopec’s asphalt production, the main asphalt production in the first half of this year increased by 700,000 tons year-on-year, and the main business schedule in July and August continued to increase month-on-month. Overall, bitumen supply is expected to be looser.
On the demand side, typical downstream indicators and financial conditions are not optimistic. At present, according to the data of the Steel Union, the operating rates of demand samples in subdivided fields such as asphalt downstream road modified asphalt, construction asphalt, and waterproof modified asphalt are 13%, 21.5%, and 31.67%, respectively, which are 8 percentage points lower than the same period last year. 14 percent and 13 percent. At the same time, even if the demand for asphalt improves marginally in the third quarter, combined with the financial situation such as net financing of local government special bonds, the overall probability is lower than expected.
In terms of inventory, according to the statistics of Cloud Asphalt, the current social inventory of asphalt is still at a high level year-on-year. Although there have been continuous destocking recently, the destocking rate is relatively slow, and the spot market is still in a state of no shortage of spot goods. It is worth noting that some of the main refineries have accumulated pressure on asphalt due to the increase in the operating rate of atmospheric and vacuum. Therefore, the implementation of the price reduction promotion policy has formed a certain impact on the price of asphalt in the spot market.
The evaluation of bitumen valuation should be closely combined with the actual production situation. Although the cracking price difference between bitumen and Brent is at a historically low position, the cracking price difference between bitumen and diluted bitumen (including CIF discount) should be evaluated in combination with actual production raw materials. Recently, the CIF discount of diluted bitumen has loosened, falling from -15 USD/barrel to -16 USD/barrel. According to calculations, the current cracking price difference between asphalt and diluted asphalt (including discount) is still at a centrally high position. In the third quarter, as asphalt production remained at a high level, combined with the subsequent strengthening of diesel oil, the refinery profit improved. The operating rate of atmospheric and vacuum operations of the main and ground refineries is expected to further increase and maintain a high level. Strengthening, asphalt valuation will weaken accordingly.
In short, under the background of looser supply in the second half of the year, it may be difficult to maintain the high valuation of asphalt.
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