Weather sparks uncertainty for Vietnam’s bitumen demand

Expectations of Vietnam's bitumen consumption in July-August are mixed, given an easing in the monsoon season in some regions but an upcoming typhoon season in other parts.

The mixed expectations will likely keep importers uncertain about future seaborne purchases. Consumption in Vietnam has been lower than normal in the last quarter because of unfavourable weather, political uncertainties, a lack of new paving projects and delays in disbursement of project funds, according to market participants. The lower consumption kept inventories higher and weighed on demand for spot seaborne volumes, with many importers only focused on taking delivery of their term contract shipments.

Some importers in Vietnam are cautious and did not report consumption rising noticeably as weather in the key consuming south and central regions continues to be wet and not suitable for road paving, while the country is also set to experience typhoons next month.

Consumption will stay low until September because the typhoon season starts next month, and the first region to get hit is the north before moving towards the south, a key importer told Argus.

It is raining in the south and central regions, according to the importer. "The north is alright now but there is no good pick up [in consumption]," the importer said, adding that imported cargo inventories in the region are still notably higher.

This is in contrast to expectations from other Vietnamese importers and some Asian traders, which said that consumption and demand for seaborne bitumen are expected to be higher in July and August as compared to previous months this year, given favourable weather in north Vietnam and more enquiries for Singapore cargoes, to restock in August.

Consumption in the south and central regions are stable-to-weak, but overall demand in July and August are set to pick up as some new road projects are in the pipeline, a market participant said.

Inventories are falling in some parts of the region and there is a need to replenish stocks now, while the domestic selling price is also expected to increase, participants said.

"Demand in Haiphong and north Vietnam is good, and we are able to sell more than last month," another importer told Argus. "If the weather continues to be good, then demand will improve further in the coming weeks and that can increase import appetite."

Vietnam is a net importer and typically secures most of its seaborne volumes from Singapore, Thailand, Taiwan, and China. Vietnam imported 1.04mn t of bitumen in 2023, up by 20pc from 866,000t imported in 2022, according to GTT data. Singapore cargoes accounted for about 32pc of Vietnam's total imports last year, while Thailand, Taiwan, and China together accounted for about 35pc of the total imports, the data showed. This compared to a 33pc and 40pc share, respectively, in 2022.

Middle East penetration

Some importers are worried that domestic prices are unlikely to rise in the near term, because of increased availability of relatively cheaper Middle East-origin cargoes in the region. They noted that this would cut domestic appetite for Asian cargoes and would in turn weigh on imports.

Vietnam imported about 252,000t of bitumen from the Middle East in 2023, accounting for about 24pc of the total imports, show GTT data. This compared to 135,000t imported in 2022, which accounted for about 16pc of the total imports.

Imports from the Middle East totalled 156,000t over January-May, nearly tripling from 55,000t imported during the same period last year. The region's imports from Singapore during the five-month period this year totalled 135,000t, down from 150,000t a year earlier.

Imports from the Middle East increased as the inter-regional price arbitrage with Singapore was wide open. The Argus assessed ABX 1 fob Singapore prices averaged $421.50/t for the week of 12 July, while fob Iran bulk prices averaged $294.50/t for that week.

Vietnam importers noted that Middle East-origin bulk cargoes were priced at low-$400s/t on a cfr basis, which was still lower than prevailing fob Singapore levels during the period.

By Sathya Narayanan