Recession pressures Argentina asphalt demand

Demand for asphalt in Argentina remained weak in the first half of 2024 as high inflation and austerity cuts plagued the country.

Asphalt sales in Argentina fell by almost 60pc in the first half from a year earlier, according to energy ministry data, driven mainly by economic uncertainty tied to spending cuts promoted by President Javier Milei.

At the end of last year Milei implemented nearly 35pc in government spending cuts with the intention of reducing the country's persistent deficit. Part of the strategy included halting public works projects for a year, which has cut construction sector GDP by almost 20pc in the first quarter of 2024.

Containing the country's deficits is a strategy to curb Argentina's persistent inflation, which registered an annual rate of 271.5pc in June — almost three times the figure recorded in the same month last year.

Accelerated inflation caused the Argentine peso to quickly lose value, making the purchase of dollars the only effective means of doing business abroad. The country's current official exchange rate is Ps940.78 to $1, making the price of importing US Gulf asphalt approximately 367,000 pesos/st.

Market participants have also reported little or no chance of purchasing on credit, which has made asphalt imports difficult. Imports decreased by 80pc in the first half of the year, according to official data.

Once Argentina gets its inflation under control, asphalt imports to the country should increase as demand returns. Argentina's increasing reliance on its Vaca Muerta shale has resulted in reduced asphalt production because of the lighter quality of crude from the formation, leading to higher imports in recent years.

Prior to the recession, asphalt imports were on the rise and reached nearly 200,000 metric tonnes (t) in 2022, according to data from Kpler.

By Julio Viana