Price gains triggered by the Mideast Gulf war could temper Brazilian asphalt demand in the coming months.
Some Brazilian distributors are worried that asphalt prices may extend gains, buyers may purchase less and interrupt the seasonal hike in demand that occurs once the rainy season ends in April.
Values for delivered asphalt in Brazil have risen by more than 50pc since the US-Israeli war with Iran started in late February. US Gulf coast asphalt prices rose by almost 80pc, and Mediterranean values increased by nearly 60pc over the same period.
Domestically produced asphalt prices in Brazil also strengthened in response to higher priced imports. Acelen and Ream, both private refineries, increased asphalt values by 25pc and 40pc in April, respectively. Petrobras hiked prices by 10-15pc on average.
Buyers initially pushed back on the rapid price gains. But construction companies might be forced to absorb higher costs once paving demand kicks in after the rainy season ends. But some participants have noted weaker sales because of rapid price increases.
Others reported that persistent rains, mainly in Brazil's northeast, are also preventing companies from starting their paving work, which may delay peak demand until later in the season.
The regions that are showing firmer demand, on the other hand, are those where road paving has been tendered to private companies since they are more efficient than state-run entities in absorbing price increases. Rio Grande do Sul, Santa Catarina, Mato Grosso do Sul, São Paulo and Rio de Janeiro states are some examples, according to participants.
Even though demand varies significantly from one region of the country to another, most distributors agree that it will strengthen ahead of the planned elections in October for governors and the nation's president, traditionally periods when civil construction programs ramp up.
While some have reported concerns that demand could weaken if further price increases occur domestically, construction companies' paving contracts are expected to be carried out on schedule. Buyers may withhold purchasing imported supply until demand rises and their inventories are depleted, however.
In the first quarter of the year, Brazil imported almost 66,000 metric tonnes (t) of asphalt, 30pc higher than the same period last year. More than half of it came from Turkey and 25pc came from Spain, all purchased before Mediterranean prices surged after the Israeli-US war with Iran.
