Asian Bitumen Supply/Demand Update Seah Siew Hua Argus Media November 2009, Singapore
Contents Asian supply and demand balance High demand growth countries Key exporting countries Country by country balance
Rising markets Growth in asphalt demand driven by industrialisation in developing economies China and India are the key performers. China s s produced 14.77mn t in 2008, up 3.1pc from 2007. While imports in 2008 reached 3.22mn t, down 9.5pc from 2007. India s s domestic production is expected to reach 4.8mn t in 2009 up from about 4.45mn t in 2008. Indonesia, Thailand and Vietnam are also expected to continue to have healthy growth.
Asian Markets Key growth markets include China, India, Indonesia, Vietnam, Thailand. Mature or stable markets include Japan, Singapore, Taiwan, South Korea and Australia. Uncertain markets include Malaysia, Bangladesh and the Philippines
High demand growth Key demand growth markets that have emerged this year despite a weaker economic scenario are China and India. Other markets with strong potential are Thailand, Indonesia and Vietnam. Demand for imports from China and India have however waned this year. Thailand, Indonesia and Vietnam have the potential for more growth but much is dependent on government funding.
Key exporting countries in Asia Singapore Thailand South Korea Taiwan
A country by country balance of demand and supply
Country Snapshot China Key growth market with consumption reaching around 17.99mn t in 2008. A 5.27pc increase from 2007 Domestic production is increasing, and expected to increase by around 50pc in 2009. Demand expected to be strong in 2010 the final year of the 11 th five-year plan. Domestic production is strong as refiners are more inclined to produce bitumen over fuel oil. Since 1 January 2009, a consumption tax over 800 Yuan/t was imposed on buyers. Higher domestic production has affected import levels and hurt North Asia neighbours. In 2008, imports fell 9.5pc to 3.22mn t.
China s Imports Imports have been on a slight decline with Chinese buyers mostly taking only term contracted volumes. Surge in domestic production this in 2009 by 53.6pc for January to September compared to the same period in 2008. Improved domestic bitumen quality has also helped to drive sales. Import levels seemed to have peaked in 2007 at 3.5mn t. In 2008 imports started to decline, showing a 9.5pc drop from 2007. Exports levels are still minimal but improved this year to around 43,500t on the back of Sinopec s s efforts to raise export levels.
China bitumen production and imports ( 000t) 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 Jan-Sep 2009 Production Import
Country Snapshot India Key growth market Production more or less meets demand But small amount of imports. Import levels on the decline due to strong domestic production. India asphalt production ('000t) Fiscal Year ending in April 2006/07 3,887.80 2007/08 4,506.08 2008/2009 (Projected) 5,000.00 India's domestic asphalt sales ('000t) Fiscal Year ending in April 2006/07 3,838.00 2007/08 4,436.00
Robust domestic growth Higher domestic prices in 2008 have however made the Indian market more attractive to local refineries and the level of exports are low except for term volumes to Bangladesh. Demand is growing huge public works such as the Golden Quadrilateral and the north-south and east west corridors Production and consumption in the 2008 calendar year reached 4.45mn t. Production for January to September 2009 reached 3.61mn t, while consumption reached 3.79mn t. Key exporter is Iran with some cargoes also coming from Singapore and Bahrain.
Country Snapshot Vietnam Strong growth area where domestic demand relies entirely on imports. Demand dipped in 2008 to 420,000t but is expecting to come back strongly in 2009 at 550,000t. In 2007 imports grew by more than 40pc to 461,350t due to strong domestic demand. Demand growth has been driven largely by the $17bn economic stimulus that the government has pledged to spend this year. Imports mostly from Singapore and Thailand with occasional volumes coming from South Korea, Japan, Taiwan and Iran.
Country Snapshot Thailand Strong growth in domestic market Domestic consumption in 2008 fell by 15.5pc on the back of political instability in the country. But consumption is expected to be revived this year with the government economic stimulus. Domestic consumption reached 468,500t from Jan to September 2009. Exports dipped in 2008 as well and this year exports are not likely to return to 2007 levels yet due to some weakening in regional demand. Over the years however, exports have grown as a result of efforts to improve asphalt quality.
Thailand consumption and exports in 000t 1,600.0 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0-2004 2005 2006 2007 2008 Jan - Sep 2009 Asphalt Production Domestic Comsumption Export
Country Snapshot Australia Stable demand Demand since 2007 till present stable at around 800,000t. While imports started out being mostly from Singapore, in 2007, we saw imports from Thailand catch up at around 60,000t. Australian asphalt imports from Singapore (t) 2000 2001 2002 2003 2004 2005 2006 2007 2008 6,655 8,948 11,092 23,262 21,772 79,621 84,060 57,000 58,133
Country Snapshot Japan Mature market with stable domestic consumption. But exports have been declining in recent years and affected significantly this year by lower Chinese cfr prices. Domestic consumption in 2007 inched up 1.5pc to 3.37mn t from 2006 but in 2008 it fell 13.9pc on the back of weaker demand. Exports continued declining in 2008 by 5.9pc to 175,000t after a sharp fall in exports of 43.2pc in 2007 from 2006. This was prompted by high domestic prices and increased exports from South Korea. Over 90pc of exports are still term cargoes to China while the remaining volumes go to Vietnam and the Philippines.
Japan bitumen at a glance V olum e in '0 0 0 t 6,000 5,000 4,000 3,000 2,000 1,000 0 2004 2005 2006 2007 2008 Jan - Sep 2009 Year Production Consumption Exports
Country Snapshot Singapore Key asphalt producer with production of around 160,000t/mth most of it exported. Export levels dropped again in 2008 to 1.49mn t after increasing 13.3pc in 2007. Next year may be a stronger year for exports on the back of demand from infrastructure projects in the region generated by government economic stimulus. China is still the largest importer but mostly through term cargoes. Singapore Asphalt Exports (mn t) 2000 2001 2002 2003 2004 2005 2006 2007 2008 1.11 1.37 1.5 1.6 1.64 1.44 1.42 1.61 1.49
Singapore s Key Export Destinations (t) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 China Malaysia Austr alia Hong Kong SAR Indonesia Vietnam 2004 2005 2006 2007 2008
Country Snapshot Taiwan Key exporter with domestic consumption declining. But consumption might see a revival this year due to economic stimulus. Exports fell sharply in 2008 due to a shut down at CPC s Kaohsiung refinery and delays the recommencement of operations due to poor margins. Imports have increased this year to 62,109t due to activity by smaller dealers seeking to replace shortages by major producers. Domestic consumption has been revived this year and for the first 10 months of 2009 have already surpassed 2008. Weak Chinese cfr prices continue to affect margins, but production this year has improved since last year s slump.
Taiwan at a glance (t) 1,500,000 1,000,000 500,000 0 2003 2004 2005 2006 2007 2008 2009 (Jan - Oct) Total Consumption Total Exports Total Production Total Imports
Country Snapshot South Korea Mature market with domestic demand stagnant in recent years. Production has increased steadily to cope with strong demand from China. The biggest exporter to China. Added capacity in 2007 with GS Caltex s new plant with 1mn t/yr capacity.
South Korea at a glance in '000,000t 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2008 2009 (Jan - Sep) Year production consumption exports
Country Snapshot Malaysia Growth has been stable In 2006/07 fiscal year demand was around 639,000t and this was up to 676,100t for the 2007/08 fiscal year. Demand is expected to grow around 5.04pc for 2009 and possibly higher for 2010 with support from economic stimulus. Imports around 280,000t-300,000t from Singapore yearly. In 2006, imports fell to 278,658t from 380,346t in 2005 a 26pc drop, as domestic production increased. Imports from Singapore dropped further to 253,054t in 2008, on the back of strengthening local production.
Country Snapshot Indonesia Potential for growth, funding is key. Imports mainly from Singapore and very attractive to Singapore suppliers due to the higher prices buyers here are willing to pay. Demand in 2009 expected to be around 1.1mn t according to government estimates but industry estimates place it at around 850,000-900,000t. Production in 2009 estimated to be around 500,000t with around 300,000-400,000t in imports.
Country Snapshot Indonesia Imports increased significantly in 2007 and 2008 when production was on the decline in those years - at 470,000t and 400,000t respectively. Boost to consumption with more stability in political regime and 2009 being an election year. Domestic consumption in 2007 and 2008, estimated to be around 445,000t and 520,000t respectively.
Country Snapshot Bangladesh Domestic demand around 150,000t but varies hugely Production around 60,000t/yr. Imports in the last two years of around 50,000t including Indian term supply.
Country Snapshot Iran In the 2008 Iranian calendar year (March 08 March 09), production was around 3.8mn t with 800,000t going to exports. From March this year to the middle of November production is estimated to be around 2.85mn t and exports have been close to 800,000t in the same time. Export sales have improved in 2008 and continue to do so in 2009 with reduced smuggling from Saudi Arabia. Establishment of bitumen sales on Iranian Mercantile Exchange has helped to boost trading. Key supplier to the Gulf region and Africa. Additional production capacity planned.
Country Snapshot Bahrain Capacity of 65,000t/mth and production in 2008 is at capacity due to strong demand in the region. Majority of product goes towards exports with only around 45,000-55,000t/yr going into the domestic market. Total export sales by the Bahrain Petroluem company (Bapco) estimated to be around 660,000-700,000t in 2006 and 2007. But last year export sales were estimated to have grown above 750,000t. Main markets are UAE, Qatar and Oman.
Conclusion Growth in Asia is expected to continue especially with governments in the region rolling out economic stimulus plans. But some producing countries have proved to be relatively price sensitive over the last two years and have cut production levels significantly China and India have increased domestic production significantly this year but that has yet to sufficiently affect overall demand for imports. Demand is growing in the Middle East and shortages in recent months call for greater production capacity.
Thank you! Seah Siew Hua Argus Media, Singapore Tel: +65 6469 9950 Email: seah.siewhua@argusmedia.com