News Code : 45744

Petrotahlil - Iran's bitumen exports face continued uncertainty in 2021 amid a rally in prices and delays to the disbursement of government funds.

The increasingly strict implementation of US-led sanctions on Iran in the past two years has pushed down margins from the country's crude oil operations, eroding the government's ability to fund road paving projects.

But bitumen bulk prices have increased 2½ times since May, driven largely by a rally in vacuum bottom (VB) prices. Bulk bitumen prices were at $255/t fob Bandar Abbas on 18 December, up from $102.5/t assessed on 6 May.

The gains in Iranian VB prices have come partly because of their formula link to HSFO prices, which have also shown strength. The weakness in the Iranian rial against the US dollar has also added to the upward momentum in prices over the past few months.

"The share of the bitumen price in one metric ton of asphalt paving cost was 5pc in the past, but it has jumped to 50pc now," said a member of Iran's Bitumen Association.

Iran produces about 6mn t/yr of bitumen, of which around 2mn t/yr is consumed in the domestic market. The country also exports substantial volumes to south Asia, Africa and Middle Eastern markets.

The fall in fund disbursements by the government in the past two years has led bitumen producers to finance part of the road projects themselves and deliver supplies.

As a result, the Iranian government is an estimated IR8,000-20,000bn in debt to the bitumen producers. This cannot continue as the producers need cash flow, market participants said.

The Iranian government had planned a 27pc increase in its construction budget for the current Iranian year that started in April. The estimated budget for road construction was increased by 32pc in the draft that was submitted for parliamentary approval, industry sources said. But these funds were not released.

The Iranian parliament also approved the allocation of 1mn t of bitumen for rural paving projects in November, but no funds have been released for this initiative either.

Iranian producers looked to raise exports in 2020 to take advantage of a weaker rial and lower supplies in other countries. Exports are likely to hit 5mn t in 2020, up from the 4.3mn t exported in 2019, according to the Iranian Mercantile Exchange (IME).

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