January 22, 2013

Shortage of Bitumen impacts Road Works

Another bitumen shortage is looming in South Africa in the first half of this year because of planned maintenance shutdowns by three oil refineries, potentially disrupting road construction and rehabilitation activities in the country. 

Also known as asphalt or tar, bitumen is a by-product of oil refining and a crucial element in the building and rehabilitation of roads. 

Philip Hechter, the chairman of the SA Bitumen Association and the chief executive of Murray & Roberts subsidiary Much Asphalt, said on Friday that a shortage of about 20 percent of the country’s bitumen requirement was expected because of the shutdowns. 

He said Sapref, Engen and Caltex refineries were expected to have shutdowns between next month and the end of May and at least one or more refinery would be out of production during this period.
“This will put pressure on the system and I guess demand will outstrip supply,” he said. 

But Hechter said imports would satisfy between 10 percent and 15 percent of demand. This meant there might still be a shortage of between 5 percent and 7 percent of demand, he said.
Despite the shortage, he said it would not the have same impact as the shortage in October 2011 when “we were caught with our pants down”. 

Much Asphalt would be importing bitumen in bulk, with the first shipment scheduled to arrive next month and another shipment planned for about a month later, if not sooner.In addition, many businesses that used bitumen had obtained containers in which to store bitumen and had built up strategic stock, Hechter said. 

“There will still be pressure on the system but it [the shortage] will be better managed.”
Still, bitumen imports had significant cost implications because they involved a R1 500 a ton premium compared with the local price, he said. 

Hechter was aware of plans to secure some bulk storage facilities for bitumen in Cape Town, Richards Bay and Mozambique. “In five to seven years, this problem will be a thing of the past,” he added.
Road construction and rehabilitation company Raubex confirmed in November that it was investing about R20 million in storage facilities to cushion it from the impact of bitumen shortages

Financial and commercial director Francois Diedrechsen said then there appeared to be a 30 percent supply shortage of bitumen in the market and the storage facilities it was building meant it could import bitumen at volumes that made it more cost effective. 

A shortage of bitumen in the local market lasting for several months from October 2011 caused chaos in the road construction and rehabilitation industry. It led to a grinding halt for many jobs done by smaller enterprises in the sector that used asphalt for driveways, parking lots and small contracting work. Some of these firms are believed to have since gone out of business because of cash flow problems caused by the bitumen shortage. 

By -  Roy Cokayne
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