Infrastructure plans to boost Australian bitumen demand...

Infrastructure plans to boost Australian bitumen demand

Published date: 04 December 2020
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Australia's bitumen demand looks set to rise in the next few years after federal and state governments unveiled ambitious infrastructure plans in recent budget announcements for the July 2020-June 2021 fiscal year.
Infrastructure funding featured heavily in Australia's 2020-21 federal budget released in October, with the government planning to invest a total of A$110bn over 10 years in transport infrastructure across the country.
The funding covers upgrades, maintenance and new projects across Australia's road, rail, bus and pedestrian networks and is expected to boost the country's bitumen demand in the coming years.
Australia is a key importer of bitumen, which is used in road construction. The country's imports reached 842,996t in the 2019-20 fiscal year, down by 8.97pc from a year earlier.
Australia's bitumen demand has remained largely unaffected by the Covid-19 pandemic, as road works have continued even during lockdowns in place since March. Bitumen imports totalled 212,123t from July-September, up by 43.8pc on the year. Australia typically imports cargoes from Asia-Pacific but occasionally purchases from the US Gulf coast and Bahrain.
The infrastructure funding boost is part of the government's Covid-19 recovery plan to revive the country's economy and create jobs. Key initiatives include:

• An additional A$490.6mn for the Coffs Harbour bypass in New South Wales
• A$528mn for upgrades to the Shepparton and Warrnambool rail lines in Victoria
• A$750mn for stage one of the Coomera Connector in Queensland
• An additional A$80mn for the Wheatbelt Secondary Freight Network in Western Australia
• A$136mn to progress the Main South Road duplication in South Australia
• A$65mn for the Tasman bridge upgrade in Tasmania
• A$46.6mn for National Network highway upgrades in the Northern Territory
• A$87.5mn for the Molonglo river bridge in the Australian Capital Territory
• An additional A$1bn for the local roads and community infrastructure programme, bringing total funding to A$1.5bn. The programme supports local councils in delivering priority small-scale local road and community projects in the 2020-21 fiscal year.

After the federal government's budget announcement, which was delayed from May to October, state governments announced their respective 2020-21 budgets, with infrastructure investment also heavily featured. Key highlights from the states of Queensland, Victoria and New South Wales — the country's three largest bitumen consumers — include:
Queensland

• A$400mn state funding towards a A$440.25mn package of road upgrades, as part of Queensland's economic recovery strategy
• A$415mn jointly funded package of road upgrades, as part of the Australian government's economic stimulus package to deliver shovel-ready projects across the state's network.

New South Wales

• A$33bn worth of transport infrastructure investments, including A$14bn in transport infrastructure to improve connectivity in greater Sydney

Victoria

• A$2.2bn for the suburban rail loop project
• A$48.4mn for the Murray basin rail project
• A$31.4mn in upgrades on freight routes to improve journeys for farmers and processors in Victoria's vital southwest dairy supply chain
• A further A$411mn to resurface, rebuild and maintain 1,700km of roads
• A A$117mn package of road and intersection upgrades across Melbourne

Market participants expect the increase in bitumen demand to take place at a gradual to moderate pace, as most of these projects are likely to span several years.
"The bigger construction projects will only use bitumen in the final stages, so I don't expect bitumen demand to increase dramatically in the next year," one importer said.
The boost in infrastructure spending and expected growth in bitumen demand come at a time when Australian refiner and marketer Viva Energy is mulling the future of its 128,000 b/d Geelong refinery in Victoria. The refinery is the country's only bitumen producer and can produce around 150,000 t/yr of the product.
The Australian federal government is meeting with representatives from domestic oil refineries this week to discuss measures to keep as many of them running as possible.
By Regina Koh​