Bitumen Prices Explained
Geopolitical tensions and evolving industry demands pushed bitumen prices to increase by 2.76% in market value. Increased instability in key oil-producing regions and the continued attacks in the Red Sea further heightened concerns about oil security and bitumen supply routes. Thus, this contributed to the commodity’s fluctuating prices.
Why are bitumen prices fluctuating?
1. Oil Production Cut
The announcement of oil production cut by OPEC+ until March 2024 will potentially reduce its manufacturing this year as crude oil is a major feedstock in making bitumen.
Additionally, the notable shift in Russia’s oil export strategy (half of its crude oil is directed to China) means a concentrated market on one of the biggest oil producers. Furthermore, Angola’s departure from OPEC is a significant reduction in the organization’s oil production. Thus, these compounding factors largely affect bitumen prices.
2. Slow Asia-Pacific Market
The APAC bitumen market shows sluggish growth as most importing countries display slow economic growth influencing their buying patterns and leading to decreasing bitumen prices. Most government-funded projects are significantly cut due to the following reasons:
- Weak demand from Indonesian imports as the country prepares for its federal election and no new major road projects will be released in the near term.
- The expected cut on fuel subsidies will likely reduce Malaysian consumption as the government will focus on inflation rate issues.
- Vietnam’s imports will remain stable. However, experts predicted a decrease in purchases as the country’s economy is not faring well.
China’s construction industry is slowing down, easing the crowded bitumen prices and demand side. While this is a good sign to offset the increasing production input prices, the country started leveraging its conventional economic plan.
This includes decreasing its reliance on imports and utilizing its current resources to save its economy from deflation. The country is the world’s second-largest importer of goods and this economic campaign will eventually influence bitumen prices over the years.
Which variables impact the price of bitumen?
- Oil Production Cut
- Slow Asia-Pacific Market
- Raw Materials
- Global Economy
Where does bitumen come from?
Bitumen is a sticky and black substance used in various applications such as road construction, roofing, and waterproofing.
It is a petroleum-based product and its processing involves several steps to remove impurities and modify its properties to meet the specific needs of its intended use. Additionally, bitumen’s marketability comes from its top unique properties:
Adhesiveness – Bitumen’s adhesive property makes it a good element to bind together other materials such as stone, gravel, and sand.
Waterproof – Its waterproof characteristics make it an important material in manufacturing roofs because it creates a barrier against water and moisture.
Durability – Its durability to withstand a wide range of weather conditions and traffic loads makes it a good sealant on road constructions.
Here is a detailed overview of its processing methods:
1. Air Blowing – A process in which air is blown through hot bitumen to oxidize it. This method increases the stickiness of the bitumen and makes it more resistant to deformation. Air-blown bitumen is often used in roofing applications as it is more durable and can withstand higher temperatures.
2. Solvent Deasphalting – This technique uses solvents to extract asphalt from the bitumen. It produces a bitumen that is less viscous and has a lower melting point. Solvent-deasphalted bitumen products are used in road construction applications as it’s easier to work with and produce a smoother asphalt pavement.
3. Blending – Different types of bitumen can be blended to achieve the desired properties. For example, air-blown bitumen can be blended with solvent-deasphalted bitumen to produce a bitumen that is both durable and easy to work with.
Blending is used to produce bitumen products that meet the specific requirements of a particular application. This includes polymers and hard-grade bitumen for paving.
What are the uses of bitumen?
Bitumen is a versatile and useful material majorly used in building and road construction. However, as infrastructure and technology continuously develop, its application will vary in the coming years.
1. Road Construction – Bitumen is the primary binder used in asphalt concrete, the most common type of road pavement. Asphaltic pavements are durable, flexible, and relatively inexpensive to construct and maintain. Additionally, they are ideal for a variety of climates and traffic loads.
2. Roofing – Bitumen is used in various roofing materials such as shingles, roll roofing, and bitumen membranes as these materials are durable, waterproof, and reasonable. Also, they are relatively easy to install and repair.
3. Waterproofing – Foundations, roofs, and bridges use bitumen as waterproofing. Waterproofing materials made from this product are very effective at preventing water from penetrating structures.
4. Coating – The oil and gas industries use bitumen as a sustainable coating to protect their steel pipes from corrosion. This ensures that coated pipelines last longer.
5. Tank Foundation – The mixture of bitumen and sand is essential in making a tank foundation as it prevents it from weathering and rusting.
What is the future price of bitumen?
Bitumen prices become elevated due to the strained oil supply chain. Additionally, market analysts expect that the price of bitumen will increase in the coming years:
Growing demand – The increasing infrastructure development and urbanization in developing countries will affect bitumen prices over the years. For instance, India’s expressway projects will fuel the country’s commodity imports.
Limited supply – The supply of bitumen is limited as it is a byproduct of crude oil refining.
Rising production costs – The costs of producing and transporting bitumen frequently fluctuate due to factors such as inflation and the increasing cost of energy.
Overall, the rough price estimate of bitumen will reach $600-700 per metric ton by 2030.