Since September, the asphalt market has been continuously bottoming out. According to monitoring data from Shengyi Society, the price of asphalt in Shandong region was 3520 yuan/ton on September 1st, and on September 24th, the market in Shandong region fell to 3410 yuan/ton, a decrease of 2.9%. The second round of decline is mainly due to poor demand.
On the demand side, demand remains weak and at a historically low level compared to the same period. Last week, typhoons made concentrated landfall in the southern region, and after experiencing “Capricorn” and “Beibijia”, demand gradually encountered obstacles from south to north. The shipment volume in East China, North China, and Shandong decreased, and the construction of downstream terminals in East China was affected by the typhoon weather, resulting in a slowdown in refinery shipments; The construction demand for projects in Shandong and North China has decreased, the trading atmosphere has weakened, and the shipment volume has decreased. Poor payment collection from construction sites, poor stocking enthusiasm of operators, and a strong bearish attitude towards spot prices. Yesterday, spot prices of asphalt in Northeast, North, Shandong, and East China regions all experienced a decline.
On the cost side, US commercial crude oil inventories are still at a five-year low, while Cushing crude oil inventories are approaching the critical point of historical low inventories. In addition, the geopolitical risks in the Middle East have increased, and OPEC+has announced the postponement of production increases and flexible interventions to provide support for oil prices.
On the supply side, the pressure on the asphalt supply side is limited, and there is a possibility of a low-level increase in production. Last week, Zhenhai Refining and Chemical Company suspended production intermittently, resulting in a loss of 2 million tons/year of production capacity. Qilu Petrochemical has maintained stable production of asphalt, while Jinling Petrochemical and Maoming Petrochemical have slightly increased production, leading to an overall increase in operating rate. According to the production plan of local refineries in October, the domestic asphalt refining output was 1.33 million tons, an increase of 110000 tons or 9% compared to the previous month. The main refineries slightly reduced their production, but the local refining supply environment has slightly recovered. During the week, there was a significant decrease in social inventory in the Northeast region, mainly due to the shortened construction period of some projects in the area and the increasing willingness of operators to sell at low prices. The Yangtze River Delta region was also affected by typhoons, resulting in a backlog of refinery inventory, which led to an overall increase in factory inventory.
From the perspective of Shengyi Society, crude oil has stopped falling, and the cost side has strong support for asphalt. However, the overall demand for asphalt is relatively pessimistic, and the asphalt market is unlikely to improve in the short term.
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