Bitumen consumption has been severely dented by the crude-led price spike in Mediterranean and European cargo and truck markets since the start of the Ukraine conflict.
Evidence of a widespread sharp fall in demand has been most visible in north Africa and central Europe, while the start of the spring road construction season has been far slower across western Europe than is normal.
Spanish fob cargo prices have jumped by nearly $250/t since mid-December, $100/t of that gain since the Ukraine conflict began on 24 February, reaching a $636/t peak on 11 March before edging back to $600/t now.
Egyptian state-owned EGPC has cancelled nearly 40,000t of cargo volumes it had awarded for April delivery into its Alexandria terminal, and postponed another. While the start-up of a new bitumen unit at one of EGPC's Suez refineries was a factor behind the move, Egypt's bitumen suppliers said there has been evidence of falling domestic demand and rising inventories n Egypt, while sharply rising prices will have added to issues in financing cargo deliveries.
In Algeria, which consumed around 750,000t of bitumen last year, March consumption estimates were at just 20,000t, a third of normal seasonal levels, with the current month of Ramadan likely to cause further slippage in construction activity and bitumen requirements across north Africa.
Algerian constructors, like many others in the Mediterranean and parts of Europe, have slowed or delayed project work — many until May — in the hope that the Russia-Ukraine conflict will be resolved and prices fall, given numerous road tenders were awarded to them at values fixed at the time of the awards.
That is very much the case in Romania, where there had been market expectations of an activity and demand surge this year from 650,000-700,000t in 2021. But the recent price surge has thrown construction firms' project spends off course as most Romanian road project tenders for current work were awarded at fixed values in 2019 and 2020. A spiralling government budget deficit worsened by the pandemic has also cut funding and caused major payment issues, with Bulgaria similarly affected.
In those countries and across Europe, the spike in natural gas and diesel prices have driven up the cost of storing bitumen, which has to be heated to around 150°C, and of running mixed asphalt plants and construction machinery.
In numerous markets from Italy to Benelux, the new bitumen-consuming season has been slow to start, although Germany has been a notable exception of late, with many constructors biding their time before a belated project push.
With Ukraine expected to remain out of the bitumen cargo market this year after importing at least 175,000t in 2021 into its Black Sea ports from the Mediterranean, this has contributed to keeping Mediterranean fob cargo values at discounts to fob Mediterranean high-sulphur fuel oil.
Rotterdam and non-Russian Baltic fob cargo values have strengthened considerably in recent weeks, caused mainly by supply-side tightness in northern Europe after the ATPC refinery in Antwerp ceased production, TotalEnergies' Donges refinery restart is awaited and Russian Baltic cargo exports — which totalled up to 400,000t last year — have come to a near halt since the Ukraine conflict began.
This has triggered a Mediterranean to north Europe arbitrage, even at high and rising bitumen tanker freight rates, providing modest supplier relief as they wait for the spot transatlantic arbitrage from Europe to the US to reopen after being unprofitable for several months.
