China Bitumen Price to Increase in June

In 2017, influenced by the output freeze agreement, the overall international crude oil prices hovered at highs. Recently, the international crude oil prices kept rising due to the severe situation in Iran and Venezuela. However, Saudi Arabia and Russia intended to raise the crude oil output to maintain stable crude oil prices. Therefore, the international crude oil prices started to decline. Up to May 29, the WTI crude oil futures prices decreased from $72.27/bbl to $66.73/bbl, down $5.51/bbl or 7.62%.

In H1, 2018, China’s bitumen prices increased, as the rising international crude oil prices lifted the cost of bitumen. Recently, with the international crude oil prices declining, most market participants held wait-and-see sentiment towards the bitumen market. Around May 28, the bitumen prices at refineries of Sinopec increased by RMB 50-100/mt, and those at refineries of PetroChina rose in succession. But the bitumen prices at Shandong independent refineries were largely stable.

In June, according to the production plans at refineries, the bitumen output in Shandong will increase by 70-80kt Y-O-Y, and that in East China will decline by 80-90kt Y-O-Y. Moreover, according to GACC, the volume of bitumen imported from South Korea was 231kt in May. And SCI predicts that the volume of bitumen imported from South Korea will decline by 60-70kt to 160-170kt in June. On the whole, China’s bitumen supply will be largely stable in June.

At present, most market participants hold that the international crude oil prices will continue to decline before June 22. Furthermore, China’s bitumen supply will be largely stable in June. Besides, the inventory at refineries will be low, and the profits of refineries will underperform. On the whole, SCI estimates that China’s bitumen prices will increase by RMB 100-150/mt in June.