Domestic asphalt supply will sustain growth in 2026, with demand expansion expected to remain limited. The asphalt spot market will largely maintain a relaxed supply-demand balance throughout most of the year. Driven by both cost pressures and supply-demand dynamics, the price center for asphalt is projected to decline further in 2026.

Crude oil continues its search for a bottom

Global oil supply will continue to expand in 2026, though at a slower pace than in 2025. While OPEC+ paused production increases in Q1, it is expected to resume capacity expansion thereafter. Non-alliance producers like Brazil and Canada are projected to boost output further, whereas U.S. shale oil growth will remain constrained by insufficient investment and depressed prices. Additionally, evolving geopolitical tensions—particularly the Russia-Ukraine conflict and developments in Venezuela—will continue disrupting crude supply. Demand, constrained by sluggish global economic growth, faces an uncertain outlook. Global oil demand growth in 2026 is projected to lag behind 2025 levels, with emerging economies like China and India remaining the primary drivers, while demand in developed regions like Europe and the U.S. is unlikely to rebound. Overall, the anticipated supply surplus in the crude oil market in 2026 will continue to exert downward pressure on prices. However, potential adjustments to OPEC+ production policies and shifts in geopolitical dynamics could result in smaller-than-expected supply increases, thereby reducing market surplus expectations and limiting the extent of price declines. Concurrently, if the macroeconomic environment recovers beyond expectations, it will provide bottom support for oil prices. In 2026, any upward momentum in oil prices will likely stem from escalating geopolitical conflicts. Regarding price trajectory, crude oil is expected to enter a bottoming process in 2026, with its overall operating center shifting further downward and likely stabilizing in the second half of the year. Should the macroeconomic environment recover beyond expectations, the price floor could rise somewhat.

Supply Growth Persists

Asphalt feedstock shifts toward high-cost quota crude. While heavy crude remains the primary feedstock for asphalt production, domestic independent refiners have reduced demand for heavy materials like diluted bitumen since early 2025 due to domestic consumption tax reforms, instead turning to high-cost quota crude. Refineries without quotas have been forced to lower operating rates. Data indicates that from January to October 2025, cumulative imports of diluted asphalt in China fell 48% year-on-year, with monthly imports averaging only 380,000 tons—compared to 690,000 tons per month in 2024. In 2026, crude oil will remain the primary feedstock for domestic asphalt refineries. However, relatively tight supply of quota crude oil will keep its cost higher than that of feedstocks like diluted bitumen, continuing to constrain refinery operating rates to some extent.

Domestic asphalt refinery operating rates remain persistently constrained. Domestic asphalt production will maintain growth in 2025, with annual output projected around 28.5 million tons, representing an estimated year-on-year increase of approximately 8%. Asphalt refinery operating rates will remain persistently low at 25%–35% throughout 2025, below historical averages for the same period. Against the backdrop of asphalt overcapacity in 2026, refinery operating rates will continue to hover at suboptimal levels. Concurrently, limited crude oil quotas—the primary feedstock for independent refiners—will continue to constrain asphalt refinery utilization rates.

Domestic asphalt imports declined. From January to October 2025, cumulative imports reached 2.11 million tons, down 7.5% year-on-year, while exports totaled 335,000 tons, up 46% year-on-year. Due to the decline in domestic asphalt imports and the growth in exports, net asphalt imports contracted year-on-year. Looking ahead, against the backdrop of domestic asphalt overcapacity and relatively limited demand growth, asphalt imports will face further suppression.

Limited Demand Growth

During the 15th Five-Year Plan period, incremental investment in highway construction is projected to decline further. During the 14th Five-Year Plan period, national fiscal policies continued to drive growth in infrastructure investment. However, highway construction investment accounted for a relatively low proportion, and in recent years, investment has primarily favored new infrastructure, weakening investment in traditional infrastructure. During the 15th Five-Year Plan period, domestic highway construction demand is expected to slow further. The peak period of large-scale road network construction has passed, and the demand-boosting effect of new projects is relatively limited. Only transportation “shortfall-filling” projects in regions such as central and western China still have some room for growth. Additionally, local fiscal pressures may further impact the implementation and progress of new projects.

Demand growth for asphalt roads continues to slow. In 2025, highway construction demand may see some improvement driven by project acceleration needs and policy support, thereby bolstering asphalt consumption. However, against the backdrop of constrained overall project demand, the incremental growth in asphalt demand will remain relatively limited. From January to October 2025, China's cumulative apparent consumption of asphalt reached 26.648 million tons, marking a year-on-year increase of 9.83%. Annual apparent consumption is projected to reach approximately 32 million tons. 2026 marks the opening year of the 15th Five-Year Plan period. Asphalt road demand will exhibit characteristics of “stability with changes and structural optimization,” primarily concentrated in the road maintenance sector. Simultaneously, demand release will remain constrained by local fiscal funding limitations. While total asphalt demand will maintain growth, the incremental increase is expected to be limited.

The sluggish real estate market is suppressing demand for asphalt waterproofing. In recent years, adjustments in the real estate sector have posed challenges to the waterproofing industry. The domestic real estate market is unlikely to exceed expectations in 2026, and demand for asphalt waterproofing will continue to be constrained. The operating rates of asphalt waterproofing membrane manufacturers are expected to remain at relatively low levels.

Market Outlook

From the cost perspective, the oversupply in the crude oil market in 2026 will drive oil prices downward, potentially entering a bottoming-out process with the overall operating center shifting further downward. The core variable in the future crude oil market lies on the supply side. Adjustments to OPEC+ production policies and geopolitical factors may alter the rhythm of crude oil supply, thereby introducing uncertainty to oil price trends.

Regarding asphalt supply and demand, China's domestic asphalt market is projected to maintain a surplus in 2026. On the supply side, influenced by tax policies, domestic asphalt refineries are shifting their feedstock to quota crude oil. However, insufficient quota crude supply will continue to constrain refinery operations. Against this backdrop, asphalt refinery utilization rates are expected to remain low. Asphalt output is projected to grow modestly in 2026, with refinery profit margins staying at low-to-medium levels. On the demand side, 2026 marks the beginning of the 15th Five-Year Plan period. Asphalt road demand will be driven by maintenance projects, though funding availability remains critical. Simultaneously, asphalt demand release is significantly influenced by weather and seasonal factors. Furthermore, the ongoing adjustment in the real estate market will continue to constrain waterproofing demand for asphalt. Overall, domestic asphalt supply is projected to grow in 2026, though demand growth will be relatively limited. The asphalt spot market will remain largely well-supplied throughout most of the year, with inventories exhibiting seasonal fluctuations.

Regarding asphalt price trends, driven by both cost factors and the supply-demand dynamics of asphalt itself, the price center is expected to decline further in 2026. Supported by cost factors, prices are likely to gradually bottom out in the second half of the year. The annual fluctuation range is projected to be between CNY2,400 and 3,200 per ton.

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