Budget cuts further weigh on Indonesian bitumen demand

Indonesia's bitumen imports fell by more than 50pc in July-August on the back of a slowdown in domestic infrastructure projects as a result of government budget cuts.

The country's bitumen imports reached 50,275t in July and 55,851t in August, down by 53.9pc and 54.1pc on the year, respectively, according to Global Trade Tracker data.

Infrastructure budgets cuts and a slow disbursement of available funds for road projects have continued to dampen the country's bitumen consumption.

Domestic demand has remained persistently weak since June, despite expectations of a pick-up in consumption after the Eid al-Fitr holidays at the end of May.

Contractors are facing challenges with financial liquidity and delayed payments from the government, with some firms opting to start projects only later in the year. Some single-year projects have been converted into multi-year projects, with paving to take place only at a later stage.

The import data for September are unavailable, but early estimates from importers show a decline of around 50pc in the third quarter compared with the same period in previous years.

Some buyers are still holding inventories purchased earlier in March, when Indonesian importers lifted cargoes that were diverted from China.

"I usually take about 20,000t of both term and spot supplies during October-November, but my estimated requirements for the rest of the year are around only 12,000t," a large supplier said, further underscoring the lack of spot demand.

Indonesia's peak demand season may shift to early 2021 instead of the usual last quarter of the year because of project delays. But most market participants still expect demand to be firm during the last quarter of the year, although requirements may be much lower compared with previous years.

Indonesia typically imports around 1mn-1.2mn t/yr of bitumen, with cargoes mostly coming from Singapore and Malaysia.

Argus assessed spot bitumen prices at $278-285/t fob Singapore on 16 October.

By Regina Koh