In April, the Shandong Asphalt Market First Declined Then Rose, What Will Happen Next?

April 30th News

In April, the asphalt market in Shandong, China, completed a "first suppress then rise" trend. At the end of the month, the supply and demand situation changed. Considering the current fundamentals and key variables, the asphalt market in Shandong is expected to mainly exhibit a strong fluctuation, primarily influenced by supply, cost, and demand. At the same time, it is necessary to pay attention to uncertain factors.

The tight supply situation will continue, serving as the core support for prices and is unlikely to ease in the short term. By the end of April, the operating rate of refineries in Shandong was only 21.5%, and China's overall operating rate dropped to a low of 16.1%, leading to a shortage of supply. In May, the planned production of independent refineries in Shandong is expected to decrease both year-on-year and month-on-month, clearly indicating a supply contraction. Additionally, refineries have been continuously losing money on asphalt processing, leading companies to prefer switching to higher-profit products. As a result, it is difficult for the operating rates to increase in the short term, and the tight supply situation will dominate the market.

The cost side provides support, but volatility has intensified, making it the biggest source of uncertainty. Currently, international oil prices are fluctuating at high levels, providing cost support for asphalt. However, there’s a clear tug-of-war between bullish and bearish forces in oil prices: geopolitical tensions and low inventory levels are propping up prices, while the Federal Reserve’s wavering stance on interest-rate cuts and rising U.S. crude oil exports are weighing on upward momentum. As a result, oil prices are likely to remain volatile and diverge in the short term. Going forward, it will be crucial to monitor the U.S.-Iran situation: if tensions ease, crude oil prices could pull back, weakening the support for asphalt; conversely, if tensions escalate, it could drive asphalt prices higher.

Demand is gradually recovering but with limited strength, only providing auxiliary support. The rise in temperature has prompted road construction to start in Shandong, but terminal demand is being released slowly. The operating rates of downstream industries remain low, and high prices are suppressing the willingness to purchase. Rainfall in East China and South China is hindering construction, and the demand in the waterproofing industry remains stable without significant growth. Overall, the recovery is slow, making it difficult to drive a substantial increase in prices.

Looking ahead, the asphalt market in Shandong, China is expected to show a strong fluctuation, with upward movement constrained by demand and crude oil prices, and downward movement supported by supply. In the short term, close attention should be paid to the situation between the US and Iran, crude oil trends, and refinery operations. In the medium to long term, the focus should be on downstream demand. The expected price for Jingbo #70 in the Shandong region is forecasted to fluctuate within the range of 4300-4400 CNY/ton. Special attention should be given to the fluctuations in crude oil prices; if supply remains tight and demand accelerates, there may be a slight increase. If crude oil prices decline or demand falls short of expectations, there may be a temporary correction. Geopolitical events and crude oil prices are key factors influencing the market.