From sweet to sour crude: India’s bitumen supply improves, but prices remain elevated

Bitumen prices remain elevated in India as supply improves but crude sourcing challenges keep road construction costs high

NEW DELHI: India had faced a severe bitumen shortage at the peak of the West Asia crisis despite receiving crude supplies from Russia. The reason was that Russian oil is predominantly “sweet crude”, making it unsuitable for producing high-quality bitumen. Availability of bitumen has improved now with higher domestic production and increased imports of Venezuelan crude. However, Venezuelan crude, which yields more bitumen, comes with its own challenge — it is “sour crude” with higher sulphur content and is costlier to process.Officials said that while availability is no longer a major concern, bitumen costs remain significantly higher than in the pre-war period. Data show that the price of VG-40 bitumen, the grade most widely used for road and highway projects in India, spiked from Rs 52,000-55,000 per tonne before the conflict to over Rs 1 lakh per tonne in May, after crude supplies from West Asia were severely disrupted due to the closure of Strait of Hormuz.Since then, there has been a moderation in prices, though not enough to bring relief to road-owning agencies and road builders. As per latest data, the price of VG-40 bitumen as of Aug 16 was in the range of Rs 85,000 to Rs 86,000 per tonne. Industry insiders and officials said they are hopeful of further correction in prices, but there is no possibility of the prices going back to pre-war levels.“This means the elevated cost of bitumen is expected to keep road construction and highway project costs at a higher level. Govt will have to continue providing compensation for ongoing projects and revise the cost of projects that it plans to bid out,” said an industry expert who didn’t wish to be named.Going by industry reports, bitumen prices range from Rs 66,000 to Rs 86,000 per tonne depending on the grade, depot location and whether it is supplied in bulk or packed drums. “As of now, we have no availability issue as the pace of laying of bituminous layers is less during the rainy season. We will have to wait for the Oct-Feb period, which are crucial months for achieving the road construction target. Demand during that period will be more,” said a senior executive of a highway developer.