Iran allocates funds to boost road construction

Iran's government has approved funding for the allocation of about 1mn t of bitumen for rural road development projects to support the flagging sector.

Iran's parliament announced the allocation of 40 trillion-50 trillion ($950mn) from its budget for the current Iranian year ending 21 March 2021, according to the government. The volumes allocated were lower compared with earlier projections by the government of around 4mn t for infrastructure projects assigned by the government during the current financial year.

But the current change in the infrastructure budget for road projects comes amid protests from domestic market participants who fear overavailability of bitumen in the domestic market may spark price falls and illegal trading activity.

"Iran's domestic bitumen consumption is about 1-2mn t, as seen in previous years, thus more and cheaper bitumen cannot be absorbed in the domestic market," said a market participant.

The release of funds by the government for road projects also comes as efforts to support road construction projects suffering from cash flow issues. "Many road construction projects suffer from the lack of cash flow to get bitumen supply," the market participant added.

The funding approval has also been spurred by hikes in domestic and international bitumen prices in line with vacuum bottom feedstock prices. Argus assessed bulk bitumen prices at $180-190/t fob Bandar Abbas on 13 November, up from $152/t in October. Deals and discussions this week indicate prices are at $200/t and higher.

But there were still concerns about the proper implementation and release of these funds for domestic projects. "We hope it will increase domestic consumption and bitumen supply is meant only for determined projects," said an Iranian market participant.

The current funding approval was also hailed as a supportive measure by domestic bitumen producers following the fall in exports from Iran to key destination markets in Asia-Pacific like India. Restrictions on bitumen vessels calling to Iranian ports by Indian customs authorities have restricted supply flows in the past month.

"It can support bitumen producers as demand has reduced from importing markets and prices have surged," anIranian seller added.