Strong Petro flags $10.7 million loss from asphalt trade

Strong Petro (00852.HK) expects to record a loss of approximately $10.7 million from an asphalt product transaction, citing severe logistical issues in China and surging costs driven by geopolitical turmoil.

"The sharp changes in the market environment posed severe challenges to the Group’s cost and risk management," the company said in a filing to the Hong Kong Stock Exchange.

The projected loss stems from a purchase of approximately 1.65 million barrels of asphalt in 2026. The company stated the shipment was impacted by prolonged customs inspections and unexpected product classification issues at its import location in China, which significantly increased costs.

The announcement highlights the acute risks facing commodity traders amid global instability. With Brent crude prices surging above $109 per barrel in 2026 due to conflict in the Middle East, the company's transaction was caught between soaring transport and hedging costs and weakening demand in its target market.

The company, via its subsidiaries Nantong Strait International Trade and Hong Kong Strait, entered into a framework agreement with a supplier in November 2025 to import the asphalt. The product was intended for sale in China’s domestic market as a raw material for road production.

However, while the products were detained by customs, a sudden outbreak of geopolitical conflict in the Middle East roiled energy markets. The crisis has constrained vessel traffic through key arteries like the Strait of Hormuz and driven up freight and insurance costs globally, according to a recent World Economic Situation and Prospects report.

Strong Petro said these factors, combined with "weakened purchasing sentiment among Mainland China customers," created a cascade of issues. The final expected loss accounts for the price spread of the asphalt, warehousing demurrage charges, and related hedging arrangements.

The loss underscores the dual pressures on companies trading physical commodities in 2026: volatile international prices and shifting local market dynamics. The development serves as a negative indicator for Strong Petro's operational risk controls, and its next earnings report will be closely watched for further impacts.

(Auto-translated from an AASTOCKS.com report. The original Chinese version should be considered authoritative.)

This article is for informational purposes only and does not constitute investment advice.