India's December bitumen consumption is poised to fall below market expectations as delays in the disbursement of project funds and unfavourable weather hinder road construction activities.
But the market is increasingly conflicted about the extent of the overall decline in consumption. Some importers see a 20-30pc month-on-month drop, while some see consumption levels staying in line with November but below their initial estimates.
The country's bitumen consumption in November rose by 23pc on the month to 722,000t because of an increase in roadworks following the end of the monsoon season.
Some importers and dealers cited increasing difficulty in selling cargoes on a cash basis along the west coast of India as the reason for the expected decline in December consumption.
"[It seems that] all the traders and importers are investing their own money in anticipation that funds will be released, and [with the hope that] end customers can pay," an importer said. "Demand is there but road works are slow, if you give on credit all [volumes] will be sold."
But some dealers were unable to liquidate even on a credit basis because of mounting outstanding payments from the end consumer, market participants said.
Cost pressure on importers has been exacerbated by higher freight and demurrage charges for bulk cargoes from the Middle East. Seaborne bitumen prices have been on a downtrend, but this has increased delivered prices of imported cargoes and squeezed profit margins, forcing some buyers to the sidelines.
"There is at least a 10 times drop in the number of trucks getting loaded every day," another importer said. "It is clear that the market is slow and consumption will be poor, so [we are] not planning to take any position in the market."
Demand should technically be robust in the November-December paving period as contractors contend with a backlog of projects. This was brought on by prolonged delays in the disbursement of project funds in April that hampered road construction during the peak paving period, which was followed immediately by the onset of the monsoon season from June.
But the onset of extreme cold weather in the northern parts of India and unexpected arrival of Cyclone Mandous in southern parts have hindered roadworks this month. This has been worsened by prolonged delays in payments to road contractors by some state governments and early December elections in the key state of Gujarat.
