Report Overview - The report is the second in a series on the correlation analysis and arbitrage strategy principles of BU-FU-LU futures, focusing on the feasibility study of arbitrage strategies between asphalt and fuel oil [2]. - It aims to understand the industrial relationship between asphalt and fuel oil, review significant historical fluctuations in their price spreads, and provide trading suggestions for 2025 based on statistical analysis [2]. Industry Investment Rating - Not provided in the report. Core Viewpoints - Asphalt and fuel oil are parallel products at the refining production end, with their raw materials mainly from heavy components produced by primary refinery units. However, their downstream applications, supply-demand patterns, and pricing methods differ significantly [5]. - The fundamental situation has evolved from LU being significantly stronger than BU and FU, and BU being stronger than FU, to the current situation where FU has good demand, BU has weak supply and demand, and LU has oversupply. In 2025, opportunities for narrowing BU-FU spreads and widening BU-LU spreads should be actively sought [58]. - The statistical analysis of historical spread data shows that the BU-FU spread has a trending nature when converging, and the BU-LU spread has a rolling mean reversion property, which can assist in spread trading [60]. Summary by Directory 1. Understanding the Relationship between Asphalt and Fuel Oil from the Industrial Chain Perspective - At the refining production end, straight-run fuel oil, the heaviest component produced by atmospheric and vacuum distillation of crude oil, can be used as a raw material for asphalt production. It can also be directly sold or processed into different types of fuel oil [5]. - In the downstream, asphalt is mainly used for road and waterproofing purposes, while fuel oil is mainly used for marine fuel, power generation, and as a secondary raw material. Their supply-demand patterns and pricing methods also differ significantly [6]. 2. Review of Historical Major Fluctuations in Asphalt and Fuel Oil Price Spreads 2.1 2021 - 2022: Tightening Raw Materials and Demand Recovery Drove Asphalt to Strengthen, with High-Sulfur Fuel Oil Continuously Weaker than Low-Sulfur Fuel Oil - From April to May 2021, BU was significantly stronger than FU and LU. Positive infrastructure expectations and the tax increase on diluted asphalt were the main drivers. The tax increase on diluted asphalt increased the direct cost of this popular raw material for local refineries by 1,276 yuan/ton, about 1/3 of the market price [14][15]. - In 2022, due to sanctions on Russia, the supply of high-sulfur fuel oil in Asia increased significantly, while the demand for low-sulfur fuel oil remained dominant in the global marine fuel market. The price of high-sulfur fuel oil rose less than that of low-sulfur fuel oil and diesel. In contrast, the asphalt market gradually improved, and the BU-FU spread accelerated upward in the third quarter and reached its annual high in the fourth quarter. The BU-LU spread initially declined and then recovered [16]. 2.2 2023 - 2024: Continuous Improvement in High-Sulfur Supply-Demand Pattern, with the BU-FU Spread Continuously Narrowing - From March to August 2023, the BU-FU and BU-LU spreads both narrowed, especially the BU-FU spread. The strengthening of high-sulfur fuel oil was mainly driven by demand, including increased demand in the Singapore marine fuel market, power generation in the Middle East and South Asia, and refinery processing in China. In contrast, the asphalt market was weak, although there were some short-term supports [31]. - In 2024, the focus of the fuel oil market shifted from demand to supply. Drone attacks on Russian refineries led to a significant reduction in fuel oil exports, pushing up the price of high-sulfur fuel oil in Asia. The asphalt market had weak demand and supply, resulting in a continuous narrowing of the BU-FU spread. The BU-LU spread gradually rebounded from the bottom [35]. 2.3 2025: The BU-FU Spread May Continue to Narrow in the Second Quarter, and the BU-LU Spread May Expand in the Second Half of the Year - In 2025, the demand for high-sulfur fuel oil remains promising, while the asphalt market has relatively balanced supply and demand, and the low-sulfur fuel oil market has overall loose supply and weak consumption prospects [39]. - In the second quarter, the demand for fuel oil is strong, while the demand for asphalt may be weak due to possible continuous rainfall in the south. The BU-FU spread may continue to narrow. In the third and fourth quarters, the demand for asphalt is expected to improve seasonally, while the demand for low-sulfur fuel oil may be weak. The BU-LU spread may expand [41]. 3. Statistical Analysis of Asphalt and Fuel Oil Price Spreads and Specific Strategy Applications - Descriptive statistics show that the BU-FU spread has a right-skewed and low-kurtosis distribution, indicating that BU is relatively stronger than FU with a slightly higher probability. The BU-LU spread has a left-skewed distribution closer to the normal distribution, with a lower probability of extreme values [52]. - The BU-FU and BU-LU spread sequences are not stationary time series, but their first-order differences are stationary. This suggests that the spread volatility may have relatively fixed statistical laws [52]. - For the BU-FU spread, a trend-tracking strategy is suitable, especially when the trend is established and strengthened. For the BU-LU spread, a statistical arbitrage strategy based on rolling mean reversion can be considered [53]. - The analysis of 2025 data shows that the BU-FU spread has shifted from right-skewed to left-skewed, with an increased probability of extreme fluctuations. The BU-LU spread has a deeper left-skew, but the probability of extreme low values has decreased [55].

Core Insights - In the first quarter of 2025, sulfuric acid production in Zhejiang Province reached 647,000 tons, representing a 6.7% decrease compared to the same period in 2024, with a growth rate 9.4 percentage points lower than 2024 and 11.0 percentage points lower than the national average [1] - The total sulfuric acid production for the same period in the country was 27,368,884 tons, with Zhejiang accounting for 2.4% of the national total [1] Monthly Analysis - In March 2025, sulfuric acid production in Zhejiang Province was 227,000 tons, which is a 6.4% decrease compared to March 2024, but the growth rate was 4.0 percentage points higher than the same month in 2024 [3] - The production in March represented 2.5% of the national total sulfuric acid production of 9,212,782.4 tons for that month [3]

Group 1 - In the first three months of 2025, Inner Mongolia's crude oil production reached 539,000 tons, an increase of 8.3% compared to the same period in 2024, but the growth rate slowed down by 13.2 percentage points [1] - The crude oil production accounted for 1.0% of the national output of 54.088 million tons during the same period [1] - The growth rate in Inner Mongolia was 7.2 percentage points higher than the national average [1] Group 2 - In March 2025, Inner Mongolia's crude oil production was 187,000 tons, reflecting an 11.6% increase year-on-year, but the growth rate decreased by 10.8 percentage points compared to March 2024 [2] - The production in March represented 1.0% of the national output of 19.025 million tons [2] - The growth rate in March was 8.1 percentage points higher than the national average [2]

Group 1: Company Overview and Strategy - Jiangsu Dongfang Shenghong Co., Ltd. operates in the petrochemical industry, focusing on sustainable development and innovation [2][3] - The company emphasizes a value philosophy of "safety, integrity, innovation, and transcendence" to achieve stable and sustainable growth [2] - In 2024, the company expanded its production capacity, including a new 200,000 tons/year of photovoltaic-grade EVA, bringing total capacity to 500,000 tons/year [3] Group 2: Innovation and Technology - The company established the world's first industrial chain from CO2 to polyester fiber, winning the "International Textile Federation Sustainable and Innovation Award" [3][4] - R&D investment reached 6.35 billion yuan in 2024, a year-on-year increase of 11.2%, with 3,797 R&D personnel [14] - The PDH smart factory project was recognized as the "Most Influential Engineering Project in China's Automation Field in 2023" [15] Group 3: Financial Performance - In Q1 2025, the company's net profit increased by 38.19%, supported by low crude oil prices and recovering demand for downstream chemical products [7] - The company's overseas revenue in 2024 was 6.753 billion yuan, accounting for approximately 5% of total revenue [11] Group 4: Market Position and Competitive Advantage - The company holds a leading position in the EVA market with a production capacity of 500,000 tons/year, benefiting from economies of scale [6] - The company has developed a comprehensive product line, including recycled polyester fiber with a capacity of 600,000 tons/year, serving over 30 well-known brands [9] Group 5: Future Outlook and Challenges - The company plans to implement an AI development strategy to enhance vertical integration across its supply chain and focus on new energy and materials [4] - Challenges include navigating a complex external environment and ensuring collaboration among various business segments to maximize the "1+N" strategy [7][8]

Core Viewpoint - Luoyang, once a prominent industrial city in China, is struggling to keep pace with provincial growth and faces significant challenges in industrial transformation and talent retention [1][6][14]. Economic Performance - In Q1 of this year, Luoyang's GDP reached 135.54 billion yuan, marking a 5.9% year-on-year growth, which is the first time in nearly seven quarters that its growth rate matches that of the province [1]. - Luoyang's economic growth has been lagging behind provincial growth rates, with GDP growth rates from 2021 to 2024 projected at 4.8%, 3.0%, 3.5%, and 4.9%, all below the provincial average [7][14]. Industrial Structure - Luoyang's industrial economy has been heavily reliant on traditional heavy industries, with over 77% of its industrial enterprises classified as heavy industry, leading to structural imbalances [8][11]. - The proportion of Luoyang's secondary industry has declined from over 60% in 2006 to around 40%, the lowest since the reform and opening up [13]. Talent and Population Challenges - Luoyang's population growth has been minimal, with only a 50,700 increase since 2010, significantly lower than provincial capital Zhengzhou [16]. - The city faces a talent shortage, with only 13,300 individuals per 100,000 having a college degree, compared to 28,900 in Zhengzhou [16]. Policy and Strategic Initiatives - Luoyang has identified five advanced manufacturing clusters and 17 advantageous industrial chains for development, including electronic information and new energy vehicles [14]. - Recent reports highlight the need for improved employment opportunities, better salary levels, and enhanced talent policies to attract and retain skilled workers [18]. Regional Competition - The approval of the Zhengzhou metropolitan area is seen as a challenge for Luoyang, as it may lead to resource siphoning towards Zhengzhou, further intensifying competition [21].

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| | Un Art DD ITL | Un Arre Des ITI. | | --- | --- | --- | | 司完完期华 | SOURCE POINT | SOURCE POINT | | 燃料油早报 | | --- | | 研究中心能化团队 2025/05/20 | | --- | | 燃 料 油 | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | 日期 | 鹿特丹3.5% HSF | 鹿特丹0.5% VLS | 鹿特丹HSFO-Br | 鹿特丹10ppm G | 鹿特丹VLSFO-G | LGO-Brent M1 | 鹿特丹VLSFO-H | | | O掉期 M1 | FO掉期 M1 | ent M1 | asoil掉期 M1 | O M1 | | SFO M1 | | 2025/05/13 | 408.43 | 452.25 | -1.39 | 602.56 | -150.31 | 16.66 | 43.82 | | 2025/05/14 | 406.15 | 451.49 | -1.58 | 606.04 ...

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Report Summary 1) Report Industry Investment Rating No information provided. 2) Core Viewpoints - The asphalt market continues to face a situation of weak supply and demand. The current inventory is at a low level, and the recent inventory accumulation rate is lower than the seasonal average, resulting in limited short - term market pressure. However, with the improvement of some refineries' profits, the asphalt plant operating rate and production have marginally increased. Meanwhile, rainfall in South China in late May will affect the improvement of terminal demand, so there is also certain resistance above the asphalt market, and the industry's acceptance of high - priced resources is still limited [1]. - The strategy for asphalt investment is as follows: the unilateral trend is expected to be volatile; for the inter - period strategy, the previous long position of BU2506 - 2509 (positive spread position) can be taken profit at high prices; there are no strategies for cross - variety, spot - futures, and options [2]. 3) Summary by Related Catalogs Market Analysis - On May 19, the closing price of the main BU2506 contract of asphalt futures in the afternoon session was 3,502 yuan/ton, up 26 yuan/ton or 0.75% from the previous settlement price. The open interest was 73,925 lots, down 1,051 lots from the previous day, and the trading volume was 140,886 lots, up 21,991 lots from the previous day [1]. - The spot settlement prices of heavy - traffic asphalt from Zhuochuang Information are as follows: 3,700 - 4,086 yuan/ton in Northeast China, 3,450 - 3,600 yuan/ton in Shandong, 3,400 - 3,430 yuan/ton in South China, and 3,500 - 3,570 yuan/ton in East China. The spot prices of asphalt in North China and Shandong decreased yesterday, while those in other regions remained generally stable [1]. Strategy - Unilateral: Volatile [2]. - Inter - period: Take profit on the previous long position of BU2506 - 2509 (positive spread position) at high prices [2]. - Cross - variety: None [2]. - Spot - futures: None [2]. - Options: None [2].

Core Viewpoint - The article highlights the achievements and contributions of Fu Xiaoqing, a skilled technician at Shanghai Petrochemical, who has significantly improved operational efficiency and reduced costs through innovative solutions in instrumentation and materials research [3][4][6]. Group 1: Achievements and Contributions - Fu Xiaoqing has worked for 37 years, participating in 18 key national projects and achieving cost savings of over 24.5 million yuan through non-stop maintenance of instruments [3]. - He led a team that resolved 42 technical challenges related to production operations and project construction, resulting in cost savings of over 1.7 million yuan in 2024 [4]. - Fu's innovative work includes the development of a fog-free endoscope for boiler inspections, which improved the accuracy of environmental monitoring data [4][5]. Group 2: Innovations and Technical Improvements - Fu's innovation studio focuses on addressing technical challenges in carbon fiber composite materials and instrumentation, enhancing research and development capabilities [5]. - He has successfully implemented various technical improvements, such as the modification of imported equipment and the development of domestic alternatives, which have led to significant operational enhancements [6][7]. - Fu's contributions to the Beijing 2022 Winter Olympics included the development of innovative tools for torch assembly, earning him two national patents and recognition for technological contributions [7][8]. Group 3: Knowledge Sharing and Training - Fu Xiaoqing emphasizes the importance of knowledge sharing and training, having established a studio that serves as both an innovation hub and a training base for new technicians [5][8]. - His commitment to continuous learning and sharing expertise has led to the recognition of his studio as a model for innovation within the industry [8].