2AGENDA OF DISCUSSIONS1. BITUMEN AVAILIBILITY IN INDIA2. BITUMEN DEMAND IN INDIA3. REGIONAL AND SEASONALIMBALANCES4. EXPORT MARKET5. EXPORT PLANNING & LOGISTICS6. STRENGTH & WEAKNESS ANALYSIS
31. BITUMEN AVAILIBILITY IN INDIA BITUMEN PRODUCERS:3 Large players IOCL, HPCL and BPCL.Historically cooperative with each other.Maintains price parity.Competition exists in terms of “discounts”.Large customers have strong bargaining power.Low key “R & D” facilities and lack of lateral interactions with the actual users.
4Dedicated distribution network do not exist. However transporters play an active role between actual users and the producers.Bitumen is not a “priority” or “important” product on policy making bodies of PSU producers.AVAILABLE GRADES:By penetration grades only:60/7080/100 (although all over the world this grade mostly known as 85/100)30/40
5Not available or not easily available 100/120 Penetration GradeBlown BitumenCutback BitumenModified BitumenEmulsion (on a regular basis)
6Bitumen Availability in India 2005-6 (TMT) CompanyRefineryCapa-city30/4060/7080/100Emul-sionModi-fiedIOCPanipat500YMathura550PKoyali715Haldia450Digboi15CPCL360Sub-Total2590= 58.1%HPCMumbaiVizag330830= 18.6%BPC440KRLCochin300740= 16.6%MRPLMangaloreTotal4460
72. BITUMEN DEMAND Present demand is increasing at about 5-7%. Growth in demand due to National Highway segments and Rural road segments.Modified Bitumen market to grow to reach minimum 10% of total Bitumen demand by – Market size expected 400 TMTPA. (Current Market size: About 150 TMT)Bitumen Emulsion Market to grow to reach minimum 5% of total Bitumen demand by – Market size expected 200 TMTPA. (Current market size: About 80 TMT)
8Bitumen Demand outlook in recent years Sales in TMTGrowth in TMT% Growth03-04330050017.8%04-05360033010.0%05-0638002005.0%06-074000
9SOME OTHER ASPECTS OF BITUMEN DEMAND The Bitumen market will expand with +5% growth rate in coming years.Demand for value added Bitumen will growCustomers will demand quality product and services.Taxation aspects will play a major role for Customers to source Bitumen.Distance vis-a-vis transport facilities of Bitumen will be a major factor for the Producers / Customers.
103. REGIONAL & SEASONAL IMBALANCES Region Basis Seasonality Indices(% of Annual Demand)RegionJan / MarApr /JunJul / SepOct / DecNR262818ER312023WR37325SR3527AI33291325
11Seasonality of Demand (2006-07) CapacityGap% of Total DemandApr – June11601100- 6029.0%Jul – Sept520+ 58013.0%Oct – Dec1000+ 10025.0%Jan - March1320- 22033.0%Total40004400+ 400100.0%
12Regional Imbalances (2006-07) (in TMT) DemandCapacityGapNR14921050442ER1158465- 693WR8361625+ 789SR5141260+776AI40004400400
13Result of ImbalanceNorth and East Region face product shortage, while West and South have surplusWith growth of Bitumen demand, production capacity will grow and imbalance also may get enhancedPrice parity may not be maintained – due to basic economics.
14Solutions to Regional Imbalances Transport Logistics – Low cost alternatives requiredInland Depots – additional storage capacities requiredAugmentation of packing capacity to pack the excess capacity in lean season and also storage and distribution facilities of packed Bitumen.Logistics of packed Bitumen to be enhanced – for (1) transport (2) user friendly mechanism.……….Cont
15Conversion of basic product to value added product, pack and store. EXPORT
164. EXPORT MARKETPresent Situation: Small quantity export by IOCL to Nepal, Bangladesh and Myanmar. All packed cargo.Total Indian export: 2004 : 15,000MT, 2005 : 46,000 MTNo reported export by other Producers.No export marketing division for Bitumen in any of the PSU.No existing mechanism to calculate workable export price on FOB basis.No readily available hard currency price of Bitumen.
17Price ComparisonEarlier Indian Bitumen price was high compared to readily available export cargo from other countries.Due to recent price rationalization, the prices between Indian product and product from other Bitumen exporting countries has narrowed down.Ocean freight may play a major role for Indian cargo to create a niche market.Huge demand created by infra-structure development programme by other countries should create market for Indian Bitumen.ADB membership should help in price comparison.
19Possible Export market Neighboring Countries : Nepal, Bhutan, Bangladesh, Sri Lanka, Myanmar, Pakistan (?)Asian Countries : China, Vietnam, Cambodia, AfghanistanAfrican Countries : Ethiopia, Somalia, Tanzania.Australia
20Neighboring Countries (Packed Bitumen) Nepal and Bhutan are traditional buyer of Indian Bitumen. Only IOCL has a market set up, Invoice system, Distributor, and also a separate special Indian Rupee price for them. Market size : about 18,000 – 20,000 MTPA. Demand to increase rapidly in coming years.There is a hard currency Bitumen market in Nepal and Bhutan – projects aided by ADB. Should be very attractive for HPCL. (i.e., IRCON Project).Sri Lanka has an import market of about 25,000+ MT.Myanmar: IOCL has a presence through Indian contractors. There is scope of regular supply by HPCL.Pakistan : They imports regularly from Iran and Saudi. In changing situation why not from India (Mumbai to Karachi freight is very competitive)
21Asian Countries China : The giant importer 2005 : Own Production: 9.70 Mil MTImport : 3.17 Mil MT2006 : Projections : 15% + increase in Import DemandMain Suppliers:Korea (42%), Singapore, Taiwan, Japan, Thailand and Iran.Supply from Iran has a growth rate of 200%.Required Both Bulk as well as Packed cargo.High Season of Import: June - October
22Vietnam No Domestic Production Infra-structure growth rate is high 2005 Import : 300,000 MT2007 projected Import: 500,000 MTMain Suppliers: Singapore, Korea, IranMajor imports of packed BitumenJune – October : Regular import
23Afghanistan Major Road Projects Under ADB and World Bank Funding. USA has a major say in all the contracts – as a result supply from Iran is not easy.Several Indian contractors are working.Packed Bitumen supply from India (Mumbai) should be feasible – via Karachi.Market size: 200,000 MT ( )
24African Countries Ethiopia, Somalia, Tanzania. Close proximity to Mumbai Port.African Bitumen producers / Exporters:South Africa, Egypt, Nigeria and KenyaHigh Demand during April – SeptemberMost projects are aided by UNDP, WB or similar organizations.Liaison work is more important than price.
25AUSTRALIA Present Demand : 900,000 MT 2005 Import : 100,000 MT + Main supplier : Singapore, ThailandStrong and increasing demand for importStrict Technical SpecificationsHigh Demand during June – OctoberReady to pay good price
265. EXPORT PLANNING & LOGISTICS BULK BITUMEN EXPORTS:HPCL at present does not have logistics facilities for Bulk Bitumen Exports.For Bulk Bitumen Exports HPCL Requires:(1) Suitable Storage Terminal at the Ports – Mumbai and Vizag (about 5,000 MT + each)(2) Time Chartering arrangements with available Bulk Bitumen Carriers – which are in short supply.Sustainable, regular export contract with dependable buyers.Should be able to Supply to Nepal in Tanker Load (ex-Lucknow)
27Packed Bitumen Exports: No significant logistics problems.Sustainable policy, planning and price mechanism required.Knowledgeable Human resource required.Dependable agent with export market knowledge required.Technical specifications adjustment required – based on target country (If).
28STRENGTH & WEAKNESS ANALYSIS A PSU oil Company – having full fledged refineries and flexible production pattern and enjoy the economies of scale.In case of non-export – will not suffer heavily. Have a strong domestic market.Export will help to disburse the excess inventory – especially in lean seasons.Strong presence in two most important port cities in India, i.e., Mumbai and Vizag. One in West Coast another in East Coast.Have financial strength to establish special R&D for required changes in Specs (if required) and also for new type of packing (i.e. poly packs).Good product line – cargo available for export.
29Weakness: A PSU Company – strong bureaucratic norms and restrictions. Policy decisions takes time – while international trading requires prompt actions.Domestic prices change without notice – but there should be sustainable international price.Long time planning (about 2 years) required.Unsure stand on several “not-so-ethical” business practice in International Trading.Bitumen is not a “STAR” product.
30CONCLUSIONTODAY OR TOMORROW - GLOBAL MARKETING CONCEPT HAS TO BE ADOPTED –WHY WAIT FOR TOMORROW ?THANK YOU