Production cuts lift Asian seaborne bitumen values

Tighter export supplies from production cuts and firmer import demand from southeast Asia has lifted seaborne Asian bitumen prices to their highest level since last year's final quarter.

Argus assessed the weekly fob Singapore ABX 1 at $452.50/t on 6 September, the highest since early December 2023 and up by $7/t from the previous week. Argus assessed the weekly fob South Korea ABX 2 at $446/t on 6 September, the highest since the end of October 2023 and up by $3.50/t from a week earlier. Argus assessed weekly fob Thailand and fob Taiwan prices at $450/t on 6 September, up by $7.50/t from the previous week. This was their highest since mid-November and early December respectively.

Export supplies have been curbed from Singapore, South Korea, Thailand and Taiwan since this year's second quarter because of strong high-sulphur fuel oil (HSFO) prices and weaker export margins.

The daily fob Singapore ABX 1 was trading at a discount of about $75-80/t to 3.5pc 380cst HSFO fob Singapore values in March. The discount widened to $107.75/t to HSFO on 5 July, the widest this year.

Enquiries were weak especially from monsoon-hit Vietnam, with higher availability of relatively cheaper Middle East-origin cargoes also depressing domestic values and reducing buying capacity.

Import demand from south China continues to be weak from higher inventories and limited consumption. This is despite its existing production cuts.

Only Indonesia was seeking some volumes to restock. Some Indonesian importers have been seeking October-December laycan cargoes in advance before Singapore's export supplies dry up, ahead of the year-end peak demand season. At least two importers have issued import tenders to secure October cargoes.

But drier weather and the return of some national highway and maintenance projects in central and north Vietnam, along with unusually higher domestic demand in Thailand, increased enquiries for Singapore and Taiwan cargoes this quarter that supported prices.

Importers from southeast Asia are also seeking other Asia-origin cargoes. This strengthened enquiries for South Korea-origin cargoes, for which southeast Asia is not a major market. Prolonged weak demand from traditional importer east China because of competitive domestic offers made South Korean cargoes available for southeast Asian buyers but demand continued to outpace supplies.

Limited output

At least two of three refineries in Singapore were under partial turnaround this quarter. The Singapore Refining Company's 290,000 b/d refinery is expected to return towards the end of September, while Shell's 237,000 b/d Pulau Bukom refinery is estimated to resume around mid-October.

A Yeosu-based refiner in South Korea issued a tender to sell about 5-6 cargoes each month for loading across the fourth quarter from its 800,000 b/d refinery. But an Onsan-based 669,000 b/d refiner did not issue an export tender for September-laycan cargoes for unspecified reasons. Market participants are unsure if an export tender for October cargoes will be issued.

Export supplies from Taiwan were also limited with refiners mostly catering to their term commitments. Thailand's 275,000 b/d Sriracha refinery and 215,000 b/d Rayong refinery limited production, while the 175,000 b/d Map Ta Phut refinery has opted to produce more fuel oil.

A refinery in Malaysia had halted bitumen sales since mid-June because of limited production and is likely to return next month. This increased demand for Singapore-origin tank truck cargoes and some Singapore refiners allocated more volumes for tank truck sales, further limiting export supplies.

Export supplies in Asia are expected to be tight in the short term despite seaborne prices currently trading at a premium to HSFO values, market participants close to refiners told Argus, indicating that bitumen production might not increase soon.

Bitumen has been at a premium to HSFO values since the end of August. Argus assessed the daily fob Singapore ABX 1 at $460/t on 11 September, at a $48.25/t premium to 3.5pc 380cst HSFO fob Singapore that was assessed at $411.75/t.

By Sathya Narayanan, Claire Ng and Chloe Choo