Americas Asphalt: Spotlight on Brazil

Cobin: Hello, everyone. My name is Cobin Eggers. I'm the deputy editor of the Argus Americas Asphalt Report based in Houston, Texas. I'm joined with senior reporter on the Americas Asphalt team, Julio Viana, who is based in Sao Paulo, Brazil. In this podcast, we'll explore the evolution of asphalt demand in Brazil. We'll talk about peak demand observed in 2024, projections for the end of 2025 and the beginning of 2026. We'll understand how political, budgetary, and seasonal factors influence this market. We will also touch on a new price assessment for waterborne cargos delivered to Brazil. And this is where I'd like to start the conversation. Julio, you are now assessing prices for delivered waterborne cargos into Belém and Fortaleza. Can you tell us a bit more about that?

Julio: Hey, Cobin. Yes, so we are now assessing prices for asphalt being delivered in these two ports, which are up north in Brazil. They are CFPAR prices. So it's the price of the asphalt that is delivered there in these two ports. We started this assessment on the 19th of September, and now you can find these assessments in the Latin America part of the Americas Asphalt Report.

Cobin: So now shifting to demand in Brazil, what was the main driver of asphalt demand in the country last year?

Julio: So last year in 2024, it was the municipal elections in Brazil, and this pretty much pushed the demand for asphalt in Brazil to record highs. It was the biggest demand, the highest demand in 10 years. This pretty much occurs during election years because elections, not just in Brazil, but in a lot of countries in Latin America, push and boost a lot of the asphalt demand because the candidates are trying to prove themselves and showing work of what they are doing in the infrastructure part of their mandates. So that's why during election years demand for asphalt is a little bit higher. So last year it was sold more than three million tons of asphalt through the whole year. I think it was something around 3.1 million metric tons sold during 2024. And imports also hit a record because a lot of the...like 80% of the asphalt demand in Brazil is taken by the local production, but this other 20%, it's taken by imports. And last year, since it was one of the biggest years for asphalt in the last 10 years, the imports also hit a record. They came over more than 315,000 tons of asphalt imported during the whole year. This was double of that that was imported in 2023. The main suppliers of that asphalt in Brazil during last year was pretty much USA. USA taking like a third of all the asphalt that came into Brazil. And the other ones were Colombia, Russia, and Kazakhstan. These other two, these last two ones, it was pretty much solid asphalt coming into Brazil. But from the USA and Colombia, it's liquid asphalt.

And something that is really important about Brazil as well about the dynamics of the asphalt market in Brazil is that the second half of the year, especially August, September, and October are the biggest months for asphalt consumption because it's the drier seasons here in Brazil. It's winter, but our winter is not as cold as yours, for example. So it doesn't affect the pavement, the pavement process. But it also doesn't rain a lot because during the summer here we had a lot of rains. These really, it's problematic for the pavement process. So August, September, and October are the drier seasons, so the drier season for the country. So it's when a lot of the...most of the asphalt is consumption during this month. For example, last year, August, over 50,000 tons of asphalt were imported was the biggest month for last year.

Cobin: Very interesting. And you touched a little bit on the import markets for Brazil. I guess, what made the U.S. such a major supply source for the country?

Julio: So the number one factor that made the U.S. the major supplier for asphalt in Brazil was the dropping prices from the U.S. Gulf. Prices came to $415 per ton during September and October, which, as I mentioned, was the period where Brazil still takes more material from. And the importers here in Brazil, they took advantage of this low prices and try to stock up in material during this period.

Cobin: And now looking at 2025, what does demand look like in Brazil?

Julio: So for this year, demand, it's in a very different situation than last year because 2025 is a non-election year. So as I mentioned, the demand is pretty high during election years, and it's very different in between those periods. We are in one of those. We have an election next year. So until then, demand was expected to come down a little bit, but we had some headwinds during this year that also affected demand and pushed them a little bit lower than they expected. The first one was the delay in the approval of the 2025 federal budget law, which usually it's approved in the December of the year prior, the year that the budget is for. But this year, it was only approved in April because our legislative chambers, they entered a recession in December. They couldn't vote the federal budget law in December, so they had to wait until the comeback from recession and the comeback only started in March. So that's why we had this delay in the approval of the federal budget.

And during this period, so for the first three to four months in 2025, public agencies were limited to spending one-twelfth of the previous year's budget per month. And they were only allowed to spend in very urgent and fundamental questions. And building new roads or paving new roads was not one of these items. So sales dropped a lot for asphalt. They dropped 40% in December and stayed in that levels during January and February. And domestic production fell also 25% in the first half of this year with one of the biggest refineries in Brazil, Replan, down to about 41%.

Cobin: And then in June of this year, there were some budget cuts that also affected demand, right?

Julio: Yes. So in June, we had a 1.5 billion reais cut from the Ministry of Transport. So this took a lot of the money from the part of the government that really spends in paving projects. And we also had a shifting focus inside the Ministry of Transport. They spend a lot more in new construction, which takes longer to consume asphalt and less in road maintenance, which pretty much takes more asphalt immediately from from the market when it's maintenance work. We also have a very high interest rate during most of the part of the year. It was 14.75%, the interest rate here in Brazil. And this discourages a lot of the immediate private investment that some of the companies do in some highways here in Brazil. So all of these factors also took a toll in the asphalt demand in the year.

Cobin: And now what can we expect looking at the rest of 2025?

Julio: So, as I mentioned, the second half of the year, it's really where most of the demand for asphalt comes in Brazil. We are already seeing some signs of that. July was the month with the highest sales in asphalt during the whole year. So we started to see a little bit of pickup in demand. And we expect that some of this comes because of, as I mentioned, the dryer season is upon us and will last until October and November, which which favors paving projects. And we expect to see a little more increase in demand because the 2026 elections, which are going to be presidential elections, which are very anticipated. It's going to take place next year. So we expect that demand keeps building up during the last months of the year to come into 2026 a little bit more stronger. As I mentioned, we started to see this happening already. Imports begin began in Brazil to arrive in Belém and Fortaleza by April. And they are expected to grow because, as I said, in July we had we had the biggest...it was the month with the highest sales domestic-wise in Brazil. So we expect that imports since July will also increase.

Cobin: And now looking to 2026, how do you expect the federal elections to impact the market in Brazil?

Julio: Yes. So, as I mentioned, public works increase in election years and next year it's a presidential and state election. So these are two big decisions for the country and it will take a lot of the federal and state agents will try to push as much as they can for their infrastructure works. So we are expecting that demand recover to similar levels as 2024, maybe a little bit higher. And we also expect that to begin a little bit sooner because something that really affects elections is that the public agents here in Brazil, they can start new projects, I think some months before the elections, I would say six months before the elections. So they have to start new projects until March of 2026. So that's why we will see not just up in demand, a high...a little bit more demand in asphalt sales, but we also going to see this happening a little bit sooner than this year that happened pretty much after the second half of the year. I think we will see more demand in the first half of the year of 2026.

Cobin: Okay. Well, I guess I think we'll wrap it up there. Thanks for all the information and discussion.

Julio: Thanks. Thanks very much for having me.