Market Talks: Supply and demand scenario for asphalt market in Latin America

Author Argus

The asphalt US Gulf coast price levels changed during the Covid-19 pandemic, affecting Latin American demand. And the Russia-Ukraine conflict worsened the scenario, reducing material availability and increasing crude and oil products prices.

Join Camila Dias, Argus Brazil Country Manager, and Kauanna Navarro, the Latin American reporter for the Argus Americas Asphalt publication, and stay tuned about the asphalt supply and demand globally and in Latin markets.


Stay connected with the asphalt market


CD: Hello and welcome to 'Market Talks'- a series of podcasts presented by Argus addressing the main events impacting the commodities and energy markets in Brazil and around the world. My name is Camila Dias, Argus Brazil Country Manager. In today's episode, I talk to Kauanna Navarro, the Latin American reporter for Argus Americas Asphalt, about supply and demand globally and in Latin American markets. Welcome, Kauanna.

KN: Hi, Camila. It's a pleasure to talk to you.

CD: Kauanna, the US Gulf coast is the leading supplier for all Latin America, right? What is current asphalt production there?

KN: You are correct. In the first six months of the year, the US supplied around 70pc of total Latin America asphalt purchases. And US production increased last year to a six-year high at 123 million barrels.

One possible reason for the increase is the impact of IMO 2020 -- the International Maritime Organization’s 0.5% sulfur limit on bunker fuels that started in 2020. This was expected to redirect a lot of residual production into the asphalt pool. 

But then, of course, the Covid-19 pandemic struck, and because of lockdowns, refineries reduced their throughputs drastically, which decreased asphalt production, too. So, we may not have seen the full data or the full picture of IMO 2020’s impact emerges yet

Asphalt margins were also much more attractive than fuel margins because of the lockdowns, so this may have also led to increased asphalt production, especially in the first half of 2021.

All that being said, we may not actually see higher production this year. The tightness in feedstock markets stemming from the war between Russia and Ukraine is affecting the US refining sector. US Gulf Coast refineries that were previously importing M100 fuel oil from Russia as feedstock for upgrading units, for example, are suddenly short of product, and this likely pulled a lot of residual asphalt out of the market for use as an alternative feedstock.

CD: Kauanna, switching over to the demand side now, we saw a 10-year high demand for asphalt in the US in 2021. Is that prevailing in 2022?

Last year, asphalt demand reached its highest point since 2008, at 135 million barrels. Part of this was due to Covid-19 stimulus funding. Many of the surplus funds that weren't used up by states were instead redirected towards transportation projects, so we saw an unexpected little bump in financing last year.

Demand also benefited over the past two years from lower vehicle traffic, which allowed contractors to pave longer. Of course, the weather was a little more favorable in 2021, which also allowed for a more extended paving season and more robust demand.

But higher prices this year, largely because of higher global crude prices, may ultimately impact demand. Most suppliers expect some fall in demand due to higher asphalt prices, which reached the 14-year highs in the first half of the year.

Some of this falling demand is likely to come in the second half of the year. The main reason for that is most projects for the current paving season have already been accounted for from previous funding. None of the demand destruction has been seen yet, but ultimately higher prices will mean that federal funding covers less.

And because of costly inputs, buyers are taking a much more cautious approach to their purchasing this year, and we've seen purchasing patterns affected.

CD: And how is the US scenario affecting Latin American markets?

Latin American waterborne asphalt imports fell by 13pc in the first half of 2022 compared with a year earlier as asphalt prices in the US rose by over 50pc during the same period.

The US Gulf coast continued to be the primary source of asphalt delivered to Latin America. Still, high US prices and logistical constraints have remained a significant hindrance to new deals in the region.

Ship tracker data has shown us that the rising cost of asphalt has discouraged Latin American buyers from new purchases over the past six months. Gulf coast asphalt was around 60pc higher at the end of July compared to one year earlier.

Gulf coast asphalt has also become more expensive as motor fuel markets tightened in the US, leading refiners to coke their residual bottoms rather than produce asphalt. Motor fuel markets tightened even further after the US initiated embargoes on Russian crude and product imports in March.

The sharpest decline in demand for US asphalt was seen in Mexico, where waterborne US imports in the first half of 2022 fell by 53pc from the first half of 2021 to around 80,000t.

CD: Is the decline in Mexico imports related only to the US Gulf Coast’s current prices?

Actually, no. Mexican producer Pemex is working towards achieving fuel and refined product self-sufficiency and has invested efforts in reestablishing its National Refinery System, increasing asphalt production in recent years. Moreover, sometime in 2024, the country should see its Dos Bocas refinery come online, equipped with a yet unknown coking capacity.

So, as the country continues to increase its utilization rate, we should see higher asphalt production, mainly as a byproduct of refinery operations. At the same time, a reduction in the country's reliance on imports from the US Gulf Coast is expected. Additionally, in 2021 we saw Mexico begin shifting its import matrix, importing from other Latin American countries and displacing some US Gulf Coast shipments into the country.

CD: That's interesting, Kauanna. Is Mexico's situation the main reason for Argentina taking the number one spot in asphalt imports in Latin America?

Yes and no. Argentina returned to the waterborne asphalt market this year, importing a little over 100,000t in the first half of 2022 – compared with approximately 12,000t in 2021 and none in 2020. This made it the largest importer in Latin America in the first half of 2022, pushing Mexico to second place.

And Argentina has increased imports to supplement its reduced domestic production, as well as replace lost supply from Russia. Mediterranean and US Gulf suppliers competing to fill the supply gap. Argentine buyers have also recently taken a large amount of material from Europe, prompted by lower prices in southern Europe relative to the US Gulf.  The US Gulf coast’s premium to asphalt in Spain is around $120/t. The gap has been over $200/t in the last month, but it is still high for Latin American buyers.

However, However, the tender activity from Argentina has dried up in mid-July indicating a potential drop in Argentine imports in the coming months.

CD: I see, Kauanna. You mentioned there is a tight asphalt supply in the Brazilian market. Can you say a little bit more about that?

The asphalt market in Brazil became more restricted with increased activity in the infrastructure sector in 2022.The Brazilian construction sector grew by 9pc in the first quarter compared with the same period in 2021, according to gross domestic product numbers. Also, Brazilian purchases of polymer asphalt from Russia have dried up after the US, the EU, and others placed sanctions on the Russian energy trade earlier in the year, further tightening the regional market. But importing liquid asphalt is still very new for the Brazilian market. Last week, we heard that there was a deal in progress between the US Gulf and the north region of Brazil, but we did not have confirmation that the deal was actually closed. As we are in an election year, the demand for asphalt is higher, with government officials wanting to carry out infrastructure works before October.

CD: Thank you, Kauanna. This and other episodes of our podcast are available on the Argus website at Visit the page to follow the events that affect global commodity markets and understand their developments in Brazil and in Latin America. We'll be back soon with another edition of “Market Talks”. See you soon!


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