Road construction under pressure due to bitumen shortage

However, only 30 to 70 tons per day is being produced and, in the the long term, it is predicted that an average of four to six million tons per annum will be required.

There are a number of interrelating factors contributing to the shortage of bitumen supply. Firstly, the production of bitumen is costly, as technology used in the manufacturing process is high and secondly, production plants need to be located in close proximity to the end user in order for the bitumen producer to produce profitably.

Closure of refineries causes additional pressure

"Onerous specifications to meet certain standards on national road projects can also prevent easy entry of new bitumen producers into South Africa," says Frost & Sullivan's chemicals, materials and food research analyst, Bhavisha Jaga. "In addition, the closure of refineries, due to upgrading and maintenance of facilities, continue to place additional pressure on increasing the supply of bitumen. Chevron and Natref refineries, for example, have a limited bitumen supply, which adds to the $14 billion road maintenance backlog."

The price of bitumen fluctuates in line with the dollar price of crude oil, as crude oil is imported largely from Iran. With instability in the Middle East, and US and EU embargo on Iran crude oil exports, the price of crude oil is set to rise, causing the price of bitumen to further increase.

"With a growing restriction on Iran crude oil exports, seeking alternative crude oil suppliers such as Angola, Nigeria, Ghana and Saudi Arabia, may be an expensive but unavoidable consideration for asphalt producers in the future," says Jaga.

Repairing potholes might be sidelined

Bitumen comprises of 60% of the cost of asphalt production which is used in road construction. The bitumen supply shortage will therefore strain future road maintenance projects. Smaller, yet significant projects such as the repairing of potholes, might end up being sidelined as a result of the shortage of bitumen, as the primary focus would now be on major projects.

Plans are currently under way to resolve the bitumen shortage and are being coordinated between the Department of Transport, South African National Roads Agency Ltd (SANRAL) and the Department of Energy. According to the Minister of Transport, Sibusiso Ndebele, SANRAL is engaging with the road construction industry to directly import bitumen from overseas. The first shipment of bitumen of 4 500 tons was imported in November 2011. The import of bitumen can be expected to ease the high demand, but logistical factors, aggravated by a weakening of the exchange rate, can impose higher costs on the bitumen industry.

It is expected that, as the demand for bitumen in South Africa continues to increase, warm mix asphalt technology will most likely be used on the roads. This technology allows for asphalt to be recycled, which can reduce the demand for bitumen.