Africa Road Projects To Drive Demand for Asphalt
With many countries in Africa planning or implementing major highway building programs, demand for asphalt is expected to rise. That has prompted an increase in asphalt imports and a French asphalt company’s acquisition of a large West African company.
Imported asphalt’s price is much lower than locally produced material, especially in Nigeria, where marketers are lobbying for punitive import taxes. The low price of imported asphalt has caused concern at an African asphalt trade association.
Nigeria, which is implementing a $2-billion road development program, imports $1.9 billion worth of asphalt annually, although its state-run Kaduna Refining and Petrochemical Co. can produce 650,000 metric tons per year.
The National Association of Bitumen Marketers and Distributors of Nigeria in August said Kaduna asphalt has not been selling because “Nigeria has suddenly become a bitumen-importing country.”
The association’s national secretary, Emma Olelewe, said the price of Kaduna Refining's asphalt is $745 per metric ton, excluding transportation costs. But the landing price of imported asphalt is $529 per metric ton, which rises to $755 per ton when delivered to construction sites in Nigeria.
“The massive importation of bitumen is a big threat to that produced from Kaduna Refinery,” said Olelewe.
Much of the imported asphalt comes from Iran and the Ivory Coast, where state-owned Societe Multinationale de Bitumes (SBM) has announced plans to double annual asphalt production, to 700,000 metric tons, by 2020. The first 300,000 metric tons of capacity is expected to come on line this year.
“There is rise in demand for bitumen because of new [road] construction,” SBM CEO Mamadou Doumbia told Bloomberg in December. “Our main clients are governments that put [in] place spending in the first half of the year.”
SBM supplies 55% of the Nigerian asphalt market and also is active in Gabon, Angola, Ghana and Cameroon.
The anticipated construction boom also has drawn Paris-based Rubis to West Africa. The company on March 23 announced it had signed an agreement to acquire Antwerp, Belgium-based Eres NV, which says it is the market leader in door-to-door delivery of asphalt in West Africa.
In a statement, Rubis said Eres has "a strong logistic infrastructure, including import terminals in Senegal, Togo and Nigeria, and controls the whole logistics and supply chain, from the refinery in-take, shipping, sea-connected import terminals to inland depot till truck delivery to the final users on the [jobsite].”
Further, demand for asphalt in South Africa is expected to climb as the country gears up to implement an $846-billion infrastructure plan, which includes constructing several road links and upgrading existing ones.
The South African National Roads Agency Ltd. (SANRAL) in its 2014 national roads update said that, over the next several years, it plans to expand, to 35,000 kilometers from the current 19,704 km, the road network it manages.
The expansion will increase demand for asphalt pavement, which SANRAL says has “spiraled in price faster than consumer prices over [the] past 12 years.”
Kenya could be the leading asphalt consumer in East Africa as it embarks on a $2.8-billion, 10,000-km road-pavement plan, to be completed in 2017.
The program, which President Uhuru Kenyatta in January said could transform Kenya into “a low-cost investment and trading destination and promote national integration,” calls for paving 2,000 km of small roads in the 2014-15 fiscal year and another 3,000 km—80% small roads and 20% highways—in 2015-16.
An additional 5,000 km, also comprising 80% small roads and 20% highways, will be paved in fiscal 2016-17.
Kenya Infrastructure Cabinet Secretary Michael Kamau in January said the project “presents immense opportunities for [the] asphalt business in East Africa.”
Kamau added, “Asphalt pavement [remains] the most popular [material] in road construction, and it is important that the right standards of the bitumen and asphalt are adhered to.”
Last September, Kenya prequalified 49 international and local companies for 3,000 km, set to break ground before June. The prequalified foreign companies include China Wu Yi and nine other Chinese contractors.
Others on the list are H. Young & Co. Ltd., Nairobi; SBI International Holdings AG, Kampala, Uganda; SS Mehta & Sons Ltd., Nairobi; Hayer Bishan Singh & Sons Ltd., Kisumu, Kenya; and Nairobi-based Put-Sarajevo General Engineering Co., which is part of GP PUT D.D. of Sarajevo.
Gratian Nshekanabo, managing director of Dar es Salaam-based asphalt producer and importer Starpeco Ltd., said the road sector will continue to drive East Africa’s asphalt market.
Kenya, Tanzania and Uganda allocated a combined $1.2 billion in government funds for the road sector in fiscal 2014-15. Nshekanabo told ENR via email that the region uses an estimated 100,000 metric tons of asphalt annually, sourced mainly from Iran, the United Arab Emirates, Bahrain and Singapore.
The imported asphalt ranges from primer [and] penetration grades to modified bitumen, depending on “road condition, design, standards in use and availability," he says.
Despite East African governments’ huge budget outlays for road development and many projects in progress, Nshekanabo says the region’s asphalt market is, at times, “oversupplied” because of a lack of regulation, which depresses prices.
Demand for better transportation infrastructure in East Africa is being fueled by the increased regional integration and onshore and offshore hydrocarbon discoveries and prospecting activities.
Some of the road plans are not sure things, however. For example, although Nigeria hopes to spend up to $104 billion on roads over the next 10 years, Public Works Minister Mike Onolememen on March 25 said the plans face financial hiccups after the government failed to allocate the required funds in the current fiscal year, according to media reports.
In southern Africa, Mozambique, which wants to monetize its 100 trillion cu ft of proven natural-gas reserves, plans to upgrade 2,100 km to asphalt-paving standards in 2015-19. The plan, which the government submitted in late February, still requires the parliament’s approval. The 420-km-per-year plan is down from the 600 km paved in 2014.
Another 2,800 km of Mozambique roads, many of which have major cracks, depressions, damaged bridges and numerous potholes, will be repaired. At least 57 bridges will be constructed, repaired or maintained. Routine maintenance of 20,000 km of roads also will be completed within the four years.
