India's bitumen demand is expected to continue to suffer as the country announced an extension of its Covid-19 lockdown until 3 May.
The extension comes on the back of the 21-day lockdown from 25 March. The lockdown has resulted in bitumen inventories building across ports with loading remaining negligible. State-controlled refiners are also facing difficulty in storing bitumen because of high stocks. Hindustan Petroleum has switched to high-sulphur fuel oil production as its look to get rid of the heavy bottom residue.
"This bitumen season is a complete washout," said an industry participant.
India's peak construction season for bitumen is typically January to May. Better weather and the end of the fiscal year on 31 March typically sees strong momentum for roading projects. But India's bitumen consumption for the 2019-20 fiscal year has fallen by 5pc from a year earlier to 6.3mn t. The drop in consumption is largely because the tighter availability of funds for completion of road projects and extended monsoon.
"Funds are expected to be released and pending payments will be cleared," an industry participant said.
Roading works are continuing for projects managed by the National Highway Authority of India, which are typically large-scale road projects overseen by the Road Ministry in India.
Industry participants estimate that around 150,000-180,000t of unsold inventories are at Indian ports. Vessels have been waiting to discharge cargoes as they have to complete a 14-day quarantine requirement before discharging cargoes into tanks. Bitumen vessels are also only able to discharge cargoes into ports with pipeline facilities. Ports that require bitumen to be transferred via trucks are still waiting to discharge.
Negotiations for import cargoes from the Mideast Gulf are limited as importers are waiting for domestic loading to resume before concluding new deals. Indian refiners are expected to revise bulk and drum cargo prices tomorrow with new prices effective from 16 April. Domestic prices are expected to see a downwards revision in line with import parity pricing.
The extension of the lockdown has further pressured importers that are already sitting on a huge inventory losses. Even if restrictions are loosened from 20 April onwards, road construction activity may see little momentum. Road projects are only expected to pick up after the end of the monsoon season in September.
