The Latin American asphalt market is expanding, as asphalt is increasingly used in the construction and transport sectors in growing nations. According to the Market Report Historical and Forecast Market Analysis by the specialized firm EMR, the construction market in Latin America has marked its presence with a strong market share starting from a value recorded of USD 255 billion in 2021 and for the forecast period of 2023-2028, the compound annual growth rate is expected to be 3.8%.
The expansive record in the activities inherent to asphalt is linked with the expansion of construction activity. “The construction industry is thriving in the Latin American region with exponential growth in the public and private infrastructure sectors. There is a great need for robust infrastructure, which results in the development of the construction market in the region. Moreover, the size of the construction market is also proliferating due to the increasing demand for construction in the residential sector with the growing population,” the EMR report states.
Therefore, these variables should not be analyzed separately, but it is convenient to relate them to fully understand the asphalt market in Latin America.
The correlation between the construction sector and asphalt is very large, as they are variables related to the expansion of urbanization for commercial, residential and industrial purposes.
Therefore, the drive of construction implies a boost to the asphalt market. Due to rapid urbanization, population growth, and regional economic growth Latin America’s residential sector is continually expanding. Various forms of residential housing, including high-rise buildings, country houses, urban developments, suburbs, as well as commercial and industrial buildings make up the expansive matrix of construction activity. In addition, regional governments are taking initiatives to build housing and it is expected that “this will lead to massive growth of the construction industry,” according to the EMR report. As an additional element, the Latin American region is taking advantage of the strengthening of its economy not only in the expansion of urbanization.
Governments have also applied measures of consolidation of urban, suburban and rural areas, which were haphazardly or unplanned in the past. The conditions of the Latin American neighborhoods are changing, updating and improving their general infrastructure conditions, through the provision of urban works, such as drains, sidewalks, curbs, gutters and also asphalt layer.
According to Data Insights figures published by the Bnamericas business intelligence platform, there is an acceleration of infrastructure projects in Latin America this 2023. These reached an amount of USD 4.660 billion, which went into construction in the first quarter of this year in Latin America; 88% started work in the first two months, which “in a healthy signal of a key sector to awaken the battered Latin American economies,” Bnamericas refers. This firm tracks the activity of more than 23,000 industrial projects in Latin America and the aggregate data allow estimating the start of key stages in different industries and countries. In the case of infrastructure, so far in 2023, construction or pre-construction tasks have begun on a total of 23 large projects that will require an investment of about USD 4.1 billion. All these indicators clearly refer to an expansive activity that will consequently drive the requirement for asphalt at a regional scale. With the expansion of different urbanism modalities, the additional requirement for asphalt acquires superior volumes, considering that in addition to new developments, asphalt is in constant demand due to road rehabilitation.
Regional Potential In 2021, the volume of the asphalt market was 28 million barrels in Latin America. Considering the expected expansion of 3.8 points for the current years, the boost of the activity is in development right now. This is agreed by the Pan American Roads website, specialized in the topic of asphalt. According to the writing of this site, the region “begins to recover from the paralyzed projects and the different governments are making investments in road infrastructure”. They consider that the recovery process takes place in front of a demand for more and better roads and infrastructure. According to a report by the consulting and data site Skyquest, the size of the asphalt market was valued at USD 3.8 billion in 2021 and would grow to USD 4 billion in 2022 with growth projections up to USD 5.67 billion for 2030. This implies a sector growth estimated at 5.1% in the forecast period 2023-2030. The countries leading in asphalt production, by installed capacities and tons in the Latin American region are; Mexico, Brazil, Colombia, Venezuela, and Argentina.
In the case of Mexico, with 6 refineries, they have a large installed capacity by generating asphalt as a by-product derived from crude. The volume of asphalt in Mexico corresponds to 1,585,000 metric tons produced on Mexican soil, also counting about 262,000 metric tons imported, mainly from the United States and Canada, to meet the national demand, according to 2020 data.
Brazil, on the other hand, being a large expanding economy for more than 3 decades, has developed infrastructures and technologies to develop its asphalt production capacities, about 1,300,000 metric tons per year according to 2019 data. But in addition, it has saturated the demand for asphalt to meet its needs through an annual demand of more than 2 million metric tons per year, exceeding its national production, according to Petrobras data.
Colombia is a country where the activity of asphalt production has been expanding in a very significant way. In 2019 Ecopetrol reported an annualized increase of 30% in asphalt production, thus reaching an approximate 430,000 metric tons. In 2022, Colombia exported 267,000 tons of various types of asphalt, which represented an increase of about 50% in exports compared to the previous year when 179,000 tons were sold abroad. The Company estimates that the supply of this product, both for the domestic and international market, will continue to increase, according to Ecopetrol.
Colombia is a country that is self-sufficient to meet its needs and is also a regional exporter, reaching the market in Puerto Rico, Bolivia, and Chile. Venezuela is a very particular case.
Despite the fact that the country has the largest oil reserve in the world, exceeding 330,000 million barrels, and although it enjoys significant infrastructure for the production of crude derivatives, due to the blockade measures against its economy, Venezuela has many restricted capacities.
The magnitude of the impact of these measures against Venezuela is such that they have significantly diminished its asphalt production capabilities in an abysmal way. This can be confirmed despite the opacity of the data disclosed by Venezuela in recent years, but it serves as a reference, according to the data dissemination site Tilasto, that Venezuela for the year 2012 – before the sanctions – produced 888,000 metric tons of asphalt bitumen, while the latest available data from 2020 refers to a production of only 268,000 tons. According to the Observatory of Economic Complexity (OEC), despite Venezuela’s major trade limitations, in 2021 the country exported asphalt equivalent to an amount of 3,820,000 USD, being the number 36 asphalt exporter in the world. In the same year, this item was the 49th most exported product in Venezuela, obviously at a level far below previous years, which refers to the serious country’s limits to export its production and sustain its industry in this area.
On the other hand, Argentina, according to the open data offered by Tilasto, produced 336,000 metric tons of bituminous asphalt in 2021. However, the incipient development of energy enclaves such as Vaca Muerta, led by the state-owned Yacimientos Petrolíferos Fiscales (YPF), as well as structural weaknesses in the production of the asphalt chain, have not allowed the country to make a significant leap to become an exporter. Despite being one of the major producers in the region, Argentina continues to cover its needs through importation. These general data from some countries in the region indicate that Latin America enjoys significant potential for the development of asphalt in multiple dimensions. It enjoys a significant base of energy resources, has a relative installed capacity that can continue to expand, but moreover, it is a geographical enclave with a high demand due to combined reasons, such as demographic growth and of its economies, the pattern of increase that the construction sector has, as well as the consolidation of its urban perimeters through constant public investment. These conditions open differentiated perspectives for each country. This is very important to highlight. Countries like Venezuela, with a huge resource base, could return to the asphalt market consistently only if the U.S. government creates the necessary licenses for the country to relaunch these commercial activities. The country is limitedly inserted in the international asphalt market evasively to the coercive measures against it. On the other hand, Mexico, Brazil, Argentina, as well as other countries in Central America and the Caribbean, will continue to increase their requirements through the clear link between the construction sector and the asphalt market. The Latin American asphalt market presents clear conditions of extraordinary dynamism.
