In September, Brazil overtook Malaysia as the main supplier of blended bitumen, a derivative of Venezuelan heavy oil, bound for China. This change, reported by market sources and confirmed by the latest data from China’s General Administration of Customs (GAC), marks a significant shift in oil trade dynamics.
For over a decade, Malaysia played a central role in exporting this bitumen to China, primarily certifying cargoes of heavy Venezuelan crude. Since 2019, it had almost monopolized the shipment of these cargoes, giving them Malaysian-origin certificates to avoid fiscal restrictions and U.S. sanctions. However, recent restrictions imposed by Chinese local banks on payments for Malaysian-origin cargoes have altered this situation.
A Decline in Malaysian Exports
Malaysian blended bitumen exports drastically dropped from 736,249 metric tons (mt) in July to 152,227 mt in August before disappearing entirely in September, according to GAC data. At the same time, Brazil has emerged as a key global supplier. In July, it appeared for the first time on the list of suppliers with a shipment of 108,299 mt, a volume that quickly surged to 768,853 mt in September, accounting for 72.7% of China’s total blended bitumen imports that month.
Alongside Brazil, other countries such as Indonesia and Trinidad and Tobago also increased their exports to China. Indonesia, for instance, exported 280,167 mt in September, a significant contribution in the energy supply chain between Venezuela and China.
Reasons for the Transition
This rapid transition to other origin countries was largely driven by financial concerns. According to sources familiar with the matter, local Chinese banks tightened their scrutiny of payments for Malaysian-origin bitumen, complicating the process for Chinese buyers. These restrictions prompted traders to turn to other countries like Brazil, which offered more flexible documentation and payment terms.
“Sending cargoes through Brazil or other Latin American countries lengthens the voyage to China but simplifies the payment process,” said one trade source.
Stable Supply Despite Challenges
Despite these changes, the supply of blended bitumen appears to remain stable for the coming months. Cargoes for December delivery are being offered at competitive prices, around $11 per barrel below ICE Brent futures, according to trade sources. However, supply remains tight, with only two to three very large crude carriers (VLCCs) expected to transport these cargoes to China.
Demand for this type of product, primarily used as feedstock in China’s independent refineries to produce asphalt and by-products like gasoline and diesel, slightly increased in October. However, analysts predict a slowdown in demand by November, as temperatures drop.
In total, China imported about 1.05 million mt of blended bitumen in September, an increase of 23% from August, according to GAC data. Nonetheless, imports in the first nine months of 2024 remain down 30% year on year, totaling 6.63 million mt.
