Bitumen demand during pandemic increased!

At Basekim, we recognize the dynamic nature of the bitumen market, especially in the wake of recent global events. As demand surges in the aftermath of a pandemic, we observe a significant rise in the price of bitumen. However, the freight rates for shipping this essential commodity present a contrasting story. Specifically, while the price of bitumen has skyrocketed, the tanker market seems to defy these trends. This prompts us to explore the underlying reasons behind these developments.

Argus

First and foremost, the Argus fob Mediterranean bitumen price index illustrates this phenomenon vividly. After experiencing a dramatic drop to just under $90 per ton in late April, the price has surged to over $245 per ton. This price increase stems primarily from refinery run cuts that create tight supply conditions. Additionally, as the summer construction season rebounds from lockdowns, the demand grows even more. The end of Ramadan in late May has further fueled demand in key North African markets, including Morocco, Algeria, Tunisia, and Egypt.

freight rates

However, the expected rise in freight rates for Mediterranean bitumen tankers has not materialized. Initially, in early March, the cross-Mediterranean tanker freight rates for 5,000-ton cargoes from Augusta, Sicily, to Mohammedia, Morocco, jumped to around $55 per ton. This increase largely occurred due to the costly transition to meet the IMO 2020 requirements. In stark contrast, these rates have since plummeted to between $36 and $40 per ton. Similarly, rates from Greek ports to Alexandria, Egypt, fell sharply. They dropped from around $40 per ton in early March to a mere $26 to $29 per ton today.

key factor contributing

Moreover, we identify a key factor contributing to this decline: the shift in the size of tankers utilized by trading and supply firms. Recently, the Egyptian General Petroleum Corporation (EGPC) awarded multiple bitumen import tenders to international oil trading firm Vitol. Notably, Vitol opted for larger tankers, such as its 37,000-dwt Asphalt Synergy. This strategic decision highlights a broader industry trend toward using larger tankers. This change impacts supply logistics and freight rates.

Furthermore, this trend reflects a significant shift in the Mediterranean market. The number of cargoes loaded on sub-7,000-dwt tankers has nearly halved since December 2019. Interestingly, the use of tankers above 15,000 dwt for bitumen shipments has only slightly declined. This change illustrates the industry’s pivot away from smaller vessels. Global players like Trafigura’s Puma Energy, Vitol, and French firm Rubis have largely shifted to medium- and large-sized tankers. Consequently, the conspicuous absence of smaller cargo flows from the Mediterranean to West African markets has accelerated this transition.

North African market

Despite these shifts, North African markets continue to rely on standard small-sized cargoes for their bitumen needs. Additionally, Romania has emerged as a significant recipient of bitumen volumes from Italy, Greece, and Turkey in the 4,000-7,000-ton range. This development showcases the evolving landscape of the bitumen supply chain.

Ultimately, as the bitumen market evolves, Basekim remains committed to navigating these changes effectively. We continue to prioritize quality and reliability in our products. By proactively adapting to the shifting dynamics of the industry, we position ourselves as a leading player in the global bitumen market. This approach ensures our clients receive the best possible solutions tailored to their needs.