More than 240 people from 32 countries attended the first Argus Africa Bitumen Conference at Cape Town in February 2014 to look at the opportunities and challenges for the African bitumen market in the coming years. In particular, the conference examined supply bottlenecks resulting from the low production capacity of South African refineries and lack of appropriate storage tanks.
Feedback from the sold-out conference was positive, with Dennis Rossmann, Project Manager for SANRAL (The South African National Roads Agency), commenting “as a roads engineer making use of ‘bottom-of-the-barrel’ product, I found the insights into the various legal, political, logistical, economical or mechanical constraints/challenges that refineries are faced with very useful”.
In an effort to ensure that the event remains peripatetic, Argus Africa Bitumen 2015 is taking place in East Africa, in Dar es Salaam. Mr. Adrian Binks answers some questions about the African bitumen market prior to the conference.
Q1. How do variations in the price of crude oil affect the price of Bitumen? What developments in the global crude oil market have had a direct impact on Bitumen?
Bitumen prices typically lag changes in crude oil prices, but bitumen prices do follow the general crude oil price trend. The biggest lag is seen in a country’s retail/rack selling prices compared to crude versus bitumen wholesale prices compared to crude. Bitumen wholesale prices move closer to crude oil prices as these prices are based on one cargo or barge load at a point in time, while retail/rack selling prices are impacted by the prices at which road project work is tendered, which may last for a few years.
The biggest development in the crude oil market has been the ample availability of shale oil, particularly in the US market. Better prices for shale compared to other light crudes has given refiners the incentive to increase their shale usage or add shale crudes into their crude slate, thereby reducing the yield on bitumen from their refineries.
Q2. What specification of Bitumen is best suited for the construction of roads keeping in consideration the African climate?
Bitumen is available in a variety of grades and its usage depends on the environment and application purpose. Bitumen is graded according to standardized testing methods. The most commonly used bitumen classification used in Africa is the Penetration (Pen) grade method of specifications. The Pen test is used to indicate the hardness of bitumen and it involves a standardized needle penetrating the bitumen under specified test conditions. The lower the penetration value of the needle, the harder the bitumen. For example, Pen 200/300 is a softer grade than Pen 60/70.
Emulsion bitumens are growing (mixtures of bitumen, water and emulsifying agent) in Africa as they are considered to be “green” bitumens. Emulsion bitumens are a mixture of bitumen, water and an emulsifying agent. These bitumens save energy as they require no heat for transportation, storage, mixing or spraying. There is also less atmospheric pollution as there are minimal or no hydrocarbon emissions and the jobsite is safer as there is no evaporation of volatiles into the environment.
Q3. Throw some light on the increasing demand of Bitumen. Where do you see Bitumen market five years down the line?
Bitumen global demand according to Argus demand data was at 95.1mn/t in 2013, down from the peak year of 105.5mn/t back in 2005. Global demand in 2014 is estimated to be around the same level as 2013.
In 2013, sub-Saharan Africa was at 1.7mn/t, while North Africa was at 2.2mn/t. The growth rate was double digits in 2013 and is expected to continue in 2014 and beyond. Social unrest, internal transition and high unemployment could impact short-term growth and demand in Africa.
Five years down the road, the big growth rates in demand will come from Africa, Middle East and some Latin America countries.
China and India will stabilize — After very strong growth rates in the last few years, China demand has flattened out at 20.5mn/t in 2014 and is expected to hover around the same level over the next few years. India demand is around 4.8mn/t, but despite optimism surrounding new Prime Minister Mody, the optimism is not expected to result in a surge in highway work as construction related to the golden quadrangle is over. Most future work will be resurfacing work, not new construction work.
US demand falls below China and remains flat for the foreseeable future: US demand was at 19.1mn t in 2013 and is expected to be flat in 2014 and beyond. US demand is down significantly from 2005 when demand peaked at 32mn/t. Demand is not expected to pick-up without commitment to a multi-year highway bill, which will not occur during the last two years of the Obama administration with a Republican majority in the Senate and House of Representatives.
The 2015 conference will once again be an essential event for all those involved in the African bitumen market. It will bring together senior government officials, and suppliers, distributors, traders and consumers of bitumen across the continent and further afield.
Key topics to be explored:
- Evolving sources of supply for the African market
- Focus sessions on changing levels of demand in North, South, East and West Africa
- Latest developments in corridors across Africa
- Investing in the African road industry
- What are the logistical challenges around operating in the African bitumen market?
- Performance of different bitumen specifications and the varying requirements across the continent
- Growing use of emulsions in the African market
- Road maintenance: what are the latest most cost effective and reliable ways of maintaining roads?
- Overcoming key challenges for contractors operating in the African market
For more information Argus Africa Bitumen 2015, please contact Argus:
+44 (0) 20 7780 4341