India’s Bitumen Demand Outlook Shows Mixed Signals

WPB: India’s bitumen consumption in 2025 presents a complex picture, as persistent delays in state government funding are expected to continue impacting demand, while numerous unfinished infrastructure projects could drive consumption higher.

As a net importer, India remains the largest consumer of Middle Eastern bitumen, particularly from Iran. In both 2022 and 2023, India’s bitumen consumption reached record levels, surpassing 8 million t/yr. This growth occurred despite ongoing payment delays, as suppliers extended unusually long credit terms to road contractors.

“The challenge isn’t demand itself but the availability of funds,” an Indian importer explained. Contractors are increasingly requesting credit due to delays in fund disbursement by state governments. While demand is not declining, significant growth in 2025 is unlikely, with consumption expected to remain steady compared to 2024.

Importers have been under pressure to offload inventory, offering substantial discounts to clear stock. This has squeezed profit margins, especially as procurement costs have risen amid Iran’s supply constraints. However, a backlog of delayed projects suggests that demand could be sustained once funding issues are resolved.

Refiners Expect Minimal Growth in Consumption

Some state-owned refiners foresee only a slight increase in bitumen consumption next year. To attract buyers, refiners have already been forced to sell at reduced prices, cutting into profits. This trend is likely to persist into 2025, potentially pushing refiners to scale back bitumen output in favor of more profitable petroleum products. Typically, Indian refiners produce about 5 million t/yr, accounting for 55-60% of the country’s total consumption.

“A 3-4% year-on-year growth is the most we expect since no major new road projects have been announced,” said a source linked to a state-owned refinery. “While imports may rise if domestic production is reduced, overall market conditions won’t be exceptional, and there are no plans to expand bitumen production capacity.”

This outlook casts doubt on the central government’s forecast of a 14% rise in bitumen demand, which is expected to reach 10 million t by the end of the current financial year in March 2025.

Middle Eastern Supply Constraints

Bitumen supply from the Middle East remains uncertain. In Iran, disruptions in vacuum bottom feedstock supply and logistical delays in transporting materials from national refineries to private bitumen producers are expected to persist, tightening supply. This will drive up export costs, particularly for VG40-grade bitumen, a key import for India.

Limited supply has also led to congestion at Iran’s Bandar Abbas port, raising demurrage costs for importers and shipowners, which in turn dampens demand. Market participants are also concerned about the potential return of Trump-era sanctions or other geopolitical actions against Iran in 2025, further complicating the export landscape.

Adding to the uncertainty, Iran’s central bank recently announced the gradual phase-out of the Nima foreign exchange platform. As a result, traders will now negotiate exchange rates directly, introducing further volatility in the Iranian rial’s value against the US dollar.

Meanwhile, Iraq’s recent decision to restrict the flow of oil and petroleum products into Iran—unless approved by state-owned Somo—could reduce the supply of drummed bitumen. Most bitumen producers in Iran lack a Somo license, which could affect the transshipment of Iraqi bitumen through Bandar Abbas.

Elsewhere in the region, Bahrain’s recent expansion of its Sitra refinery from 267,000 b/d to 380,000 b/d is expected to boost output of middle distillates and naphtha at the expense of bitumen production.

Shifts in Bitumen Trade Flows

During periods of low demand in India, Middle Eastern bitumen cargoes are often diverted to Southeast and East Asian markets. In 2022, seaborne bitumen prices in Asia surged to multi-year highs, increasing the demand for competitively priced Middle Eastern bulk shipments, a trend that continued in 2023. However, in 2024, demand from Asia has primarily come from China and Vietnam, as other buyers have preferred regionally sourced cargoes due to specification compatibility and logistical advantages.

“The arbitrage window between the Middle East and Asia is effectively closed,” a Southeast Asia-based trader noted. “We are unlikely to see any significant shipments from the UAE to Asia, as Middle Eastern cargoes are no longer competitively priced compared to regional alternatives, especially given Iran’s ongoing supply and logistical challenges.”

With uncertainties surrounding both demand growth and supply constraints, India’s bitumen market in 2025 is set to face a delicate balance between infrastructure needs and financial and geopolitical pressures.

By Bitumenmag

Bitumen, Petroleum, Market, Price