【Asphalt Daily】Asphalt prices remain volatile at high levels, with the June-July spread staying near a 3-year low

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Source: Energy Research and Development Center

Daily Briefing Opinions

【1】Futures market snapshot: As of the domestic daytime close on April 2, BU 2606’s main contract saw an intraday retreat from the high. The closing price was 4403, down 0.6% quarter-over-quarter compared with the previous trading day’s close. During the session, the highest reached 4489 and the lowest was 4236. The 04 near-month contract fell 0.81% quarter-over-quarter.

【2】Spot fundamentals: As of 14:00 in the afternoon on April 2, according to Longe Research’s survey and statistics, the market price of recycled asphalt in the Shandong region was 4400 yuan/ton, down 0.45% quarter-over-quarter; in the East China region, the market price was 4660 yuan/ton, down 0.43%; in the North China region, the market price was 4450 yuan/ton, flat quarter-over-quarter. In South China, the market price was 4580 yuan/ton, flat quarter-over-quarter. In Southwest China, the market price was 4750 yuan/ton, flat quarter-over-quarter.

This morning at 9:00, Trump delivered his latest remarks on Iran, saying that the U.S. military has achieved a rapid and decisive victory; that it will absolutely not allow Iran to obtain nuclear weapons; that the core strategic goals regarding Iran are close to being achieved; once the conflict ends, the strait will naturally be opened; in the next two to three weeks, they will deliver a heavy blow to them. Trump’s tough remarks boosted the external WTI crude oil price significantly. Iran’s top leader’s adviser said the Strait of Hormuz will forever be closed to enemies of the Iranian people. The end of the conflict depends on Iran’s decisions and strength, not on the delusions and arrogance of the aggressors. Disagreements between the U.S. and Iran remain; as a war has not yet resulted in any substantive troop withdrawal and the strait has not been cleared for passage, the conflict’s repetitive nature still persists, and it has an adjustment impact on energy price fluctuations.

Bloomberg News reported that China has asked privately owned refinery enterprises to maintain the output of gasoline and diesel at all costs, meaning asphalt is still facing expectations of a raw material shortage. Although the market is generally in a state of “prices without available goods,” and downstream players have weak receiving-price capacity, once the road-building demand starts after April, downstream buyers will have to absorb the high-priced procurement. Asphalt’s downside resistance relative to oil products still exists.

As of the domestic daytime close on April 2, the price spread of the 06-04 contract was about -1 yuan/ton, at the historical level near the past three years. Looking ahead, based on seasonality, it is expected to continue to strengthen, and the opportunity for a calendar spread for offsetting risk may open up.

【3】Outlook and strategy: In the short term, under war-related risk, with expectations of tight crude oil raw material supply, and under the behavior of ensuring supply of refined oil products, asphalt should still be viewed as trading in a range but tilted upward. Considering security mechanisms, a related month spread arbitrage can be selected, with particular attention to the 4-6 spread for a backspread; the 6-9 backspread for a calendar spread is also possible, that is, a short butterfly spread arbitrage.

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Responsible Editor: Zhao Siyuan