East coast
Most East coast buyers had adequate inventories and were deferring their wholesale purchases for as long as possible. One buyer stated that East coast wholesale prices for PG 64-22 were last heard around the $300 level or lower, depending on the supply source. The buyer felt that one or more refiners have supply that they are trying to move, causing the weakness in asphalt wholesale prices.
The slippage in East coast wholesale prices was reported to be due to lower crude oil prices, along with one local refiner’s coker going down for 15 days starting in early October.
One East coast wholesale buyer reported that Midwest wholesale asphalt was landing on the East coast at $315 delivered. Based on the $315 cif price, the buyer believed that the wholesale market in the East coast would have to be in the upper $200s for PG 64-22 — if volumes are available — to compete with Midwest volumes.
An East coast refiner reported selling wholesale flux volumes in the $350-365 fob range for October movement. Some flux buyers are holding off on purchases as they are expecting a flux export source to start producing and exporting flux in August.
One East coast refiner said asphalt prices were slipping in the East coast, but not falling off a cliff. The supplier reported erosion of around $5-15 in certain markets.
In eastern New York, one supplier reported its last week’s prices to be at $350 fob. However, the supplier was lowering its prices to $335 fob, effective 1 October, for PG 64-22.
In eastern Pennsylvania, one supplier reported its prices at $365 fob. Quotes for new work were at the index, which was reported to be $379 in the western section (or Zone III).
East coast marketers reported that PG 64-22 racks in the Midatlantic region were mostly in the $380s, plus or minus $10, with big customers paying around the $360 level, especially in Maryland and New Jersey. There were no more $400s in the market, and $390s were infrequent too. North Carolina prices were higher, with prices at around $390, plus or minus $10. North Carolina has a lot of index-related deals over $400.
In the Atlanta, Georgia market, prices were unchanged from the $360-400 fob range for PG 64-22. In Jacksonville, Florida, prices softened slightly to the $385-395 fob range from $395, according to one local participant. Tampa, Florida prices softened from $390-395 to $385-390 fob last week.
Gulf coast
Gulf coast wholesale asphalt prices fell by $10-20, with a bigger drop seen in the western Gulf coast. There is more wholesale supply available in the Gulf coast, but buyers are waiting to make purchases as they have sufficient inventory on hand to meet their immediate needs. Suppliers offered lower prices due to weakness in crude oil prices and a build up in asphalt inventories in suppliers’ tanks.
An eastern Gulf coast supplier reported completing no new sales. But the supplier said it was discussing prices at around $300 fob for PG 67-22 volumes that would be delivered in October.
A Gulf coast wholesale buyer reported purchasing 50,000 bl of PG 67-22 from the western Gulf coast at $315 delivered, or around $280 fob. The volume is for delivery to the southeast US.
One wholesale asphalt buyer reported purchasing asphalt by rail from a Texas supplier at $175 fob for PG 70-10. The buyer said it did a 30-day contract for 5,000t. The volume is headed to the southwest US.
Gulf coast retail prices came under pressure last week, with the biggest changes seen in the Texas market. One supplier dropped its prices by $75 to a new price range of $275 fob for PG 64-22. Premiums for specialty grades were holding, with PG 70-22 at $365, PG 76-22 at $380 and PG 76-28 at $400 fob. Other suppliers did not change their prices, thereby widening the range of retail prices to $275-350 fob in the Texas market.
Asphalt volumes moving from Oklahoma to the Dallas/Fort Worth market were at $275 fob for PG 64-22 from one local supplier. Another supplier had its Oklahoma prices unchanged at $375 fob for PG 64-22.
Other retail markets on the Gulf coast were little changed. In central and northern Alabama, asphalt prices were unchanged. Southern Alabama prices were heard at around $360-370 fob for PG 67-22. In southern Mississippi, prices were at $385 fob for PG 64-22.
Southern Louisiana prices were stable at the $350-360 fob level. In New Mexico, asphalt prices were heard in the $325-330 fob range for PG 64-22, with one supplier reporting a price of $350 fob for PG 58-28.
Midwest
Midwest wholesale prices continued to fall due to pressure from lower crude prices compared with the peak of the summer. Additionally, a build-up in asphalt inventories and lower than expected demand for asphalt also contributed to the softening in prices. Asphalt wholesale buyers appear to be holding off on purchases, as they have ample supplies. Buyers are also reluctant to purchase more asphalt than they need for this year as they would like to enter 2007 with minimum inventories for LIFO accounting purposes.
The Midwest wholesale price range for barge transactions dropped from $240-310 fob in the prior week to a new $215-260 fob range last week. One refiner at the upper end of the range said it had to drop its prices with the market to stay competitive.
One Midwest buyer purchased 256,000 bl of PG 64-22 and PG 67-22 for delivery in multiple barges during October. The volumes, which will stay in the Midwest, were sold at $215 fob. These volumes were not considered to be a winter-fill deal.
Rail wholesale deals were at higher prices. One supplier said rail volumes were at a $10-30 premium over barge prices. Wholesale PG 58-28 was reported to have a $30 premium over PG 64-22, according to one supplier.
Midwest participants said October is typically the busiest month of the year, making it highly unusual that asphalt prices would drop so dramatically this month. The price slippage appears to be mostly on the wholesale side, with retail prices remaining firm to slightly softer. One marketer said several retail marketers have committed to buy or have bought wholesale asphalt at high prices over the summer. Hence, these buyers are reluctant to drop retail prices, in the hope that they can recover their costs.
Suppliers said some wholesale buyers and contractors are attempting to get a price reduction on previously signed contacts that are at higher prices. But suppliers are refusing to drop prices on fixed and firm contracts, citing examples when they supplied asphalt at older lower price commitments during the past year, while their production costs kept rising due to rising crude.
A Midwest refiner sold 80,000-85,000 bl of roofing flux for October loading at $310-340 fob, a drop of $35-65 compared with its September prices. The refiner said the bulk of the sales were at $320-325 fob. Flux buyers said demand was down for flux.
In Kansas and Oklahoma, effective 25 September, one asphalt marketer dropped its retail prices by $50 to $275 fob for PG 64-22. The supplier cited lower crude, lower wholesale asphalt and high inventories as the main reasons behind the drop. The supplier’s polymer grades were in the $365-400 band, depending on the grade.
One Chicago, Illinois, participant reported that the market was at $325-360. The supplier said it had commitments in this market at the $390-400 fob level for PG 64-22. The retail market in St Louis, Missouri, was at $360 fob for PG 64-22.
One Minneapolis/St Paul, Minnesota, supplier had its price unchanged at $320 fob compared with the prior week. Another local marketer said the price range was $300-310, with the lower end the predominant price for October sales.
North Dakota prices were at $400 fob, while South Dakota was at $390. Nebraska pricing ranged from $400-425 fob for PG 64-22. Iowa prices were reported to be at $380 fob.
Indianapolis, Indiana, prices were at $360 for PG 64-22. Quotes were at $380 for PG 64-22 for this year, with one supplier offering a $30 premium for PG 58-28.
In Detroit, Michigan, asphalt prices were at $360 fob. Quotes for this year were at $380-400 for PG 64-22, with one supplier offering a $25 premium for PG 58-28. Quotes for next year were at $380 through June, and $420 through December.
In northern Ohio, prices were at $375 fob, with quotes for this year’s work at $400. Quotes for next year were at $425 fob through July, and $465 fob through December 2007.
In western Kentucky, asphalt prices were at $365 fob, with index-related quotes for this year and next year. Volumes moving from Kentucky to Illinois had quotes at $420 not-to-exceed, with a $380 floor. Quotes for next year were at $420 not-to-exceed, with a $330 floor.
Rocky Mountain and west coast
Rocky Mountain wholesale prices for October dropped sharply in one week. Deals and discussions last week were in the $215-250 fob range for PG 64-22 and PG 58-28, compared with $270-325 fob the week before. The dramatic $65 drop in wholesale prices was due to a combination of factors, including softer crude oil prices and a build-up in asphalt inventories in the US and Canadian Rockies.
One Rocky Mountain refiner reported completing two wholesale deals for 15,000t each at $250 fob its refinery. The supplier said these PG 58-28 and PG 64-22 volumes will be supplied from October through December. The refiner said it did have some older wholesale deals that were still lifting at the $300 fob level.
Wholesale buyers reported that railcar availability continues to be a big issue in the Rocky Mountain and West coast market. One asphalt supplier said it had booked all its railcars, and was hoping to get additional deals done if it could find additional cars available.
Suppliers and buyers are concerned about the lack of rail transport. The problem is more severe this autumn due to an increase in asphalt production from Rocky Mountain refiners resulting from the processing of more heavy crude. Suppliers said the asphalt needs to be moved out in a timely manner to allow efficient running of refineries.
Retail prices were relatively stable in the Rockies. Wyoming and Colorado prices were heard at $350-380/st fob for PG 64-22 and PG 58-28, with quotes for 2007 paving reported at $400-450 fob for conventional grades. One supplier reported its quotes for 2007 to be at the $450 fob price for PG 64-22.
A Montana refiner reported winning a 4,500 metric tonne job requiring PG 64-28 at $409 fob its refinery. The work was for next year’s paving. Quotes from Canadian sources were reported to be higher. Depending on the polymer content, PG 64-28 has a $40-60 premium over PG 64-22 and PG 58-28.
In Woods Cross, Utah, prices remained at $450 fob for AC-10. In western Washington, prices were at $475 fob for PG 64-22. And in Las Vegas, Nevada, AC-30 prices were unchanged at $425 fob.
In Phoenix, Arizona, prices were reported to be stable in the $415-430 fob range for PG 64-22 and PG 70-10 volumes. In northern Arizona, prices were at $420-430 fob for PG 64-22.
Asphalt demand in Arizona has slowed due to rainfall. Marketers said there is still work on the books that needs to be done and they are hoping to get to these jobs this year. But Arizona marketers remain optimistic about asphalt demand for the 2007 paving season.
In southern California, the market was reported have fallen to $380 fob for PG 64-10. But some lower and higher prices were also heard, with one player reporting the range to be at $370-390 fob.
Canada
The east Canadian province of Quebec had its provincial tender on 27 September for asphalt volumes to lift in October. Around 3,800t of liquid asphalt bid on this tender, much less than is typically bid for October, which has historically been a strong paving month in the region. Local marketers were disappointed with the tonnage bid, stating that government buying was less due high prices of asphalt during the year. In comparison, the volume bid in September was at 10,000t.
The results of the 27 September tender showed bids for PG 58-28 at C$390, C$409 and C$440. The winning bid of C$390 was C$105 lower than the winning bid of C$495 at the 25 August provincial tender for September paving.
At the 27 September tender, bids for PG 64-28 were at $430 and C$449. Bids for PG 58-34 were at C$437.50, C$445, C$464 and C$470. Bids for PG 64-34 were at C$487.50, C$500 and C$525. Bids for PG 70-28 were at C$487.50, C$500 and C$525.
These bids resulted in a further softening in market prices. Prices for PG 58-28 slipped from C$425-435 to around C$390 fob, effective 1 October. Based on the results of the provincial bid, the premium for PG 58-34 over PG 58-28 dropped to C$55, and the premium for PG 70-28 over PG 58-28 was at $110.
One east Canadian refiner revised its posted prices on 28 September to reflect the drop in the provincial quotes. The refiner lower its PG 58-28 posting by C$39 to C$401, its PG 64-28 posting by C$39 to C$441, and its PG 58-34 posting by C$44 (see eastern Canada posted price table).
The price erosion in the Montreal market is due to a build up in asphalt supply, partly due to inclement weather and high asphalt production. Lower than expected demand due to unexpectedly high asphalt prices was also reported to be a factor.
The Toronto, Ontario, market for PG 58-28 was reported to be holding at C$480-500. But marketers commented that this price range is coming under tremendous pressure as the differential between Montreal and Toronto has widened to C$90-110, compared to the C$30 freight differential between the two.
A few weeks of bad weather in western Canada has resulted in a build-up of asphalt inventories. Asphalt allocations to customers were reported to have stopped a couple of weeks ago. The market — which was previously extremely short of asphalt and had customers on allocation — is now offering asphalt in the wholesale open market. But supply problems still exist for certain grades of asphalt.
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