Supply of domestic bitumen may rebound in April thanks to improved economics of producing bitumen, market sources believed. Since March, negative price spread between domestic bitumen and fuel oil had continuously narrowed.
In details, East China homemade bitumen's average price rose from Yuan 4,300/mt at start of March to the current Yuan 4,600/mt, gaining 7% during the period. Meantime, East China homemade 250# fuel oil increased from Yuan 4,585/mt to Yuan 4,625/mt, inching up 0.9%. Consequently, price spread between the two resources reduced from negative Yuan 285/mt to negative Yuan 25/mt, C1's assessment indicated.
The relatively strong surge in bitumen price may stimulate domestic refineries to somewhat lift bitumen output in the future. Shandong and northern China markets would likely see notable increases in bitumen supply. Specifically, two Shandong refineries planned to resume bitumen production in April; this would increase local daily bitumen supply by 2,000mt or 34%, reliable sources told C1.
Furthermore, hiking bitumen price also pulled production margin of bitumen refineries back to positive region. This would also stimulate future bitumen supply to some extent. On Mar 21, oil refining margin was Yuan 13/mt, and this was the first appearance of positive margin in March. Margin may continue improving in the future, marketers predicted.
At present, China's overall bitumen supply remained rather tight and prices could still climb. Since start of March, most regions of China had conditions that allowed road constructions, so bitumen end user demand may gradually bounce back.
In April, domestic bitumen supply may lift 5-11% on month, C1 estimated.
