New project | Bitumen And Sulphur Industry Questions

Part
01
of four
Part
01

Overview of the Bitumen & Sulphur Industry

The bitumen and sulfur markets are related industries but also very separate. These two products are the result of refining and 95% of sulfur production is the byproduct of bitumen refining. The uses of these two products are completely different. While Bitumen is primarily used for asphalt roads, more than half of sulphur is used in foods. Canada is currently the world's largest bitumen producer and holds about 40% of the world's reserves and is also the largest sulphur exporter. Each can be found around the world in different locations. While China is the biggest importer of each, it is beginning to make to produce its own bitumen and export it.

GLOBAL DEMAND

BITUMEN
The demand for bitumen includes asphalt paving primarily, but there is also need in roofs and some secondary uses. These uses for bitumen are because of its usage at elevated temperatures. Bitumen is retrieved through a vacuum distillation process of specifically selected crude oils. Primary locations for use are Asia and Pacific (37%), United States (25%), European Union (17%), Europe (11%), South America (7%), and Africa (3%).

The world typically consumes about 35 billion barrels per year and there is currently about 5500 billion barrels of oil in the bitumen world reserve. This is enough to last well over a 100 years. Canada holds the majority of the reserves at 40%.

Africa is currently importing bitumen from Europe and estimates expect that to continue at 700,000-800,000 tons per year. They are currently having it imported into Tunisia and Morocco. The country is also having a planned shutdown of specialty products units in its refinery for a period of one year which could increase bitumen imports.

Germany saw a 4% percent decrease in bitumen usage in 2017, down to 1.61 million tons in the first 9 months. It was expected to rise in usage in 2017 from planned government infrastructure budgets but huge delays were a result of the decrease.

The United Kingdom, unlike Germany and Africa, saw a rise of 10% in bitumen import and usage at 1.19 million tons in the first 3 quarters of 2017.

SULPHUR
In the past, Canada was the main supplier of sulphur, and while that has leveled out they will always be able to produce sulphur as they produce nearly 2 million pounds per year with bitumen oil sands. The current leaders in the exporting of sulphur are Abu Dhabi, Saudi Arabia, Iran, Qatar, Kazakhstan, and Russia.

China is the largest user of sulphur at nearly 12 million tons per year. It is estimated that the world will need 70 million tons per year by the year 2020. Although with the proposed consumption tax the country plans to levy on its residents, this may drop usage dramatically. Beijing levied a consumption tax in 2008 and it curbed fuel oil imports drastically. It is expected that China will drop from its 12 million tons per year.

Sulphur production is expected to decrease with the International Maritime Organization's sulphur cap on marine fuels. In addition, refiners are lowering residual output due to pressures being placed upon them to find low-sulphur fuels. The price of sulphur could see a surge because of lower production levels.

USES

BITUMEN
Bitumen is typically used in paving and roofing because it can be elevated in temperature and the material can be used in conjunction with other liquids to be molded and formed however seen fit. These are its only uses though, it has over 100 uses including disinfectants, mulches, fence post coating, tank protection, insulating fabrics, caulking and cement compounds, levee protection, reservoir linings, dance pavilions, gymnasiums, playgrounds, and many more.

India made an announcement in December 2017 to make sure more than 90% of the roads are made with bitumen and it will increase regulations for the production and supply of bitumen in the country. The country is working with Japanese investors to set up a fund for roadway projects.

SULPHUR
Sulphur is produced from the processing of oil and gas. Without this production, the world's agricultural output would dissipate and the electronic world we live in today would not exist. Nearly 55% of sulphur is currently used in food production and another 35% in nickel, uranium and industrial process recovery. What's left is used in the manufacturing of computers, cell phones, medical imaging devices, solar cells, wind turbines and other electronics equipment.

The largest importer of sulfur is China, and then Morocco and the United States are the next largest.

PRODUCTION

BITUMEN
Low oil prices are a cause of concern for bitumen production in Canada. In 2016, crude oil protection fell about 16% which also affected bitumen production as it also dropped 3% to only 897 million barrels produced in Alberta, Canada. Bitumen was used for nearly 50% of the total energy produced in 2016 and it is estimated to increase to 60% by 2026. Canada was shipping out 2.82 million barrels per day and are expected to jump to 4.58 million barrels per day by 2026.

In December 2017, Beijing's Jinling plant was able to ship its first load of 15,700 tons of bitumen production to Hawaii. China typically imports the product but was down in 2017 by about 8% year-over-year at 4.24 million tons. Its exports of the product are up around 287,000 tons in the first 10 months of 2017.

The 2018 forecast for bitumen production in Europe is estimated to have a surplus as domestic demand sees no increases of yet, although the U.S. is expected to see closures in its Louisiana refinery and it is anticipated it will also exit the U.S. Gulf market as well. Europe is hoping to pick up this lag in bitumen needs from the United States. Of the 115 oil refineries in Europe, 74 of them produce bitumen.

Iran saw exports of 2.2 million tons of bitumen in the first 7 months of 2017. This is 17% more bitumen, but at a 6% decrease in price. The countries main destinations are UAE, Myanmar, Pakistan, Qatar, Oman, India, and China. The entire year of 2016 showed 3.3 million tons exported. Iran accounts for about 4% of the bitumen production in the world.

Nigeria awarded a contract to Ondo to begin producing bitumen in the country. They stated they have a reserve of 42 billion barrels. They currently import about 600,000 tons of asphalt per year and are spending billions of naira to have it imported.
SULPHUR
Canada is the leading world exporter of sulphur. About 65% of the sulphur in Canada is produced in Alberta with most of it being shipped out of the country. The sulphur is produced from bitumen upgrading and sour gas processing. Minor amounts are achieved through recovery in refineries. The province saw a 6% decrease year-over-year from 2016 compared to 2015. It only produced 3.7 million tons in 2016. Russia and Saudi Arabia are the next biggest exporters of sulphur. All 3 countries export the majority of the sulphur to China.

Elemental sulphur can be produced all over the world wherever sour gas and oil is produced. These include the United States, Canada, the Former Soviet Union, and West Asia.

CONCLUSION

In summary, we have shown the general market demand for bitumen and sulphur. As you can see, both are a consolidated market with manufacturers throughout the world. While Canada does retain about 40% of the bitumen reserves, it is produced in many other countries in the world. China appears to be the biggest user of bitumen, although the threat of the consumption tax will most likely decrease the importing of as much of the product into the country. It is also increasing its own production of bitumen as well. Sulphur is primarily exported from Canada. China is the largest importer of sulphur followed by Morocco and the United States.

Part
02
of four
Part
02

Key Suppliers/Refiners in the Bitumen & Sulfur Industry

Overview

The bitumen market size reached $75 billion in 2015. Global production of bitumen was around 95 million tons in 2015, and global production of sulfur is expected to reach 75.4 million tons by 2020. There are several key players in the bitumen and sulfur industry, which we have listed below. Of these top companies, we have identified Shell, BP, and Nynas as the most advanced, and Chevron as the one with the most innovative B2B customer management strategy. Below, you will find the explanations for these selections.

All top suppliers/refiners

According to a 2017 Bitumen Market Analysis report from Global Market Insights, the key players in the global bitumen market are British Petroleum, Total S.A., Chevron Texaco Corporation, China Petroleum and Chemical Corporation, Indian Oil Corporation, Royal Dutch Shell Plc., JX Nippon Oil & Energy Corporation, Petroleos Mexicanos, Bouygues S.A., NuStar Energy, Villas Austria GmbH, Marathon Oil Corporation, Exxon Mobil Corporation, Nynas AB, and Valero Energy Corporation.

The most recent Global Industry Analysts, Inc. report on the global sulfur market, published in 2015, names the major players in the global sulfur industry as Abu Dhabi National Oil Company, Marathan Petroleum Company LLC, National Est. for Agricultural and Industrial Sulphur, OAO Gazprom, Oxbow Carbon LLC, Qatar International Petroleum Marketing Company Ltd., Royal Dutch Shell Plc., Saudi Arabian Oil Company, and Valero Energy Corporation.

Based on these reports, major players in both the bitumen and sulfur industries are Marathon, Shell, and Valero.

Most advanced suppliers/refiners

ADI Analytics published an article addressing the challenges the bitumen industry faces, including declining demand and infrastructure spending, oversupply of bitumen, and falling prices. ADI Analytics concluded that bitumen suppliers will need to produce more innovative products to survive these challenges. The Ashphalt Institute claims that research on new recycling methods for bitumen is crucial in the sustainability of the industry. Shell, Nynas AB, and British Petroleum (BP) have recognized these challenges and are the most advanced suppliers leading the innovation of bitumen to promote more sustainability and efficiency.

Shell's molecular engineering team identified 13 common bitumen deficiencies and rectified at least seven of them. Shell expects to solve 10 of these deficiencies by early 2019. Shell also invests much of its research and development into reclaimed aggregate products (RAP), meaning recycled products. Its compact product range is designed using recycled bitumen materials for more infrequently traveled roads in Europe.

Tine Tanghe, the manager of the Nynas Continental Laboratory, said they are noticing the trend of using more recycled bitumen materials and testing new rejuvenating agents. Rejuvenating agents are used during the recycling stage to delay deterioration of recycled bitumen products. Nynas is testing renewable hydrocarbon oil, vegetable oil and tall oil as potential replacements or supplements to the standard virgin bitumen binder.

BP has been developing new polymer modified bitumen (PMB) that is specifically designed to be used with recycled asphalt products. PMB is already used in up to 25% of roads in some markets, but BP's new Olexobit NV products can be mixed at temperatures 20 degrees Celsius lower than other PMBs. This results not only in lower energy costs and emissions but also lowers application time, so traffic can resume on the road faster.

Best b2b customer management

Though many bitumen and sulfur suppliers provide support services, Chevron's B2B customer experience is probably the most unique. Chevron has a Supplier Diversity/Small Business Program that provides competitive sourcing opportunities and training and education to the following companies:

Small businesses
Small disadvantaged businesses
Small woman-owned businesses
Historically Underutilized Business Zone (HUBZone) businesses
Small veteran-owned businesses
Small service-disabled veteran-owned businesses
Certified woman-owned businesses
Certified minority-owned businesses
Certified LGBT-owned businesses

Chevron tracks its performance with these businesses to measure progress and provides them with progress reports. It also constantly seeks out more "diverse suppliers through active involvement in small business and minority development organizations and trade shows." This focus on smaller businesses and businesses owned by minority populations sets Chevron apart in its B2B customer management strategies.

Conclusion

The top bitumen and sulfur industry suppliers include British Petroleum, Total S.A., Chevron Texaco Corporation, China Petroleum and Chemical Corporation, Indian Oil Corporation, Royal Dutch Shell Plc., JX Nippon Oil & Energy Corporation, Petroleos Mexicanos, Bouygues S.A., NuStar Energy, Villas Austria GmbH, Marathon Oil Corporation, Exxon Mobil Corporation, Nynas AB, Valero Energy Corporation, Abu Dhabi National Oil Company, National Est. for Agricultural and Industrial Sulphur, OAO Gazprom, Oxbow Carbon LLC, Qatar International Petroleum Marketing Company Ltd., and Saudi Arabian Oil Company. Of these, the most advanced suppliers are BP, Shell, and Nynas because of their innovative technologies around recycled and more efficient bitumen products. Chevron has the most innovative B2B customer management because of its Supplier Diversity/Small Business Program, which offers unique services to small businesses and businesses owned by minority populations.

Part
03
of four
Part
03

Key Customer Types and Purchase Behaviors in the Bitumen & Sulfur Industry

Bitumen and sulfur have many applications apart from one another, however combined use cases for these products is very narrow, and appears to be limited to restricted use in road construction and is sometimes used in bituminous coal. Separately, bitumen is used in fuels, construction, asphalt, plastics, and as a lubricant, among a vast range of other applications. Sulfur is used in fireworks, matches, gunpowder, pharmaceuticals, and fertilizers to name a few applications.

Key customers of these products appear to be the manufacturers and producers of the aforementioned applications. Through our research, we determined that the majority of consumers of these products are large global companies such as oil and gas companies, and pharmaceutical companies, which have revenues in the billions of dollars. Other smaller customers are asphalt producers and fireworks producers, which have revenues in the low millions.

After exhaustive research through consumer reports, industry reports, and company reports, very little information regarding the customer purchase behaviors of these products was found to be publicly available. Despite this, we have compiled some related findings which may provide to be additionally useful for you. You can find a list of these findings in the 'Customer Purchase Behaviors' section below.

Please note that we have aimed to use the most recent information available pertaining to these topics. However, in some cases we have used some insights from 2015, due to the scarcity of more recently published information. Below, you will find a deep dive of our findings.

Applications of bitumen and sulfur

BITUMEN:
Bitumen has been used for over 40,000 years and is a type of petroleum. Bitumen is primarily used in road construction, roofing, and is also used as an additive in diesel fuels and gas oils. Bitumen is a key component in asphalt used in road construction, and is also an important element in other kinds of construction projects and infrastructure building. Eurobitme, a bitumen trade organization, has provided a PDF download of a full list of bitumen applications, which you can access here.

Bitumen's properties make it waterproof and gives it adhesive properties. It is very durable and resistant to wear and tear, therefore is frequently used in all-weather environments. Additionally, bitumen membranes are commonly used in the automotive industry in the production of sound-deadening panels.

The agriculture industry uses bitumen-based paints and disinfectants, while many industrial companies utilize bitumen as a lubricant. It is also used in preservatives, plastics, and sealants, among a vast range of other applications.

SULFUR:
Sulfur and bitumen are sometimes used together in a type of "sulfur extended asphalt." In this capacity, sulfur acts as an asphalt modifier and is typically used in road construction, as sulfur can enhance the properties of bitumen. The use of sulfur in road construction was first implemented in 1980, however by the end of the century, its use in this application was restricted "due to its environmental problems and its high reactivity toward oxidation processes," which means it is "capable of destroying the asphalt mixture." Therefore, we assume this type of product is not being used as much anymore. Outside of this bitumen/sulfur combination product, we did not locate any other applications wherein bitumen and sulfur were being used together, except in the case bituminous coal which sometimes contains sulfur. We searched through academic reports, industry reports, trusted media sites, and company websites searching for any other applications where these materials were used in combination, however no additional information could be located.

Other applications of sulfur are in the manufacturing of sulfuric acid, a chemical which is made more often "than any other chemical in the world," due to its wide range of uses. Sulfur is also used in the "vulcanization of black rubber," and is also used in fungicide, black gunpowder, and fertilizer. It is used to bleach paper, used as a preservative in foods, and its derivatives are also used in surfactants, and detergents. "Calcium sulfate (gypsum) is mined on the scale of 100 million tonnes each year for use in cement and plaster." In addition to these applications, sulfur is commonly used in pharmaceutical products, disinfectants, fireworks and matches.

Key customer types

We assume that the key customers of bitumen are the producers and manufacturers of the products that contain bitumen. Based on the research presented above, it is clear that bitumen is very frequently used in the oil and gas industry as well as in the asphalt industry. We analyzed companies operating in these industries to understand their size. Based on this, we assess that most companies who purchase bitumen are very large, and often are times global corporations. Below, you will find some examples of these companies and their relative size:

Cespa - This company operates in the oil and gas industry and has a revenue of €15.4 billion.

Eni - Eni also operates in the oil and gas industry has a revenue of €8.3 billion.

ExxonMobil - This company is the "largest publicly traded international oil and gas company," and has a revenue of $226 billion.

Each of these oil companies are members of Eurobitme, and therefore are clearly very active in the bitumen market. Asphalt companies also make up a solid portion of Eurobitme's membership. Below we have outlined the revenues of some asphalt companies to give an idea of their size. These companies appear to be a significantly smaller in size, compared to the oil and gas customer set above.

Vance Brothers Company - This company sits on the board of a modified asphalt organization. (Modified asphalt is generally a bitumen and sulfur combination product, as we will discuss down below). Vance Brother's has a revenue of $4.3 million.

ACT Asphalt Specialties - This asphalt company has a revenue of $5.1 million.

With regard to sulfur customers, fireworks companies are likely a big consumer of sulfur, based on the research discussed above.

Black Cat - This fireworks company has a revenue of $18.6 million.

Fertilizer is another key area where sulfur is used, as noted above. The Koch Fertilizer Company has a revenue of $70 million.

Lastly, as mentioned above sulfur is commonly used in pharmaceuticals. Takeda is a pharmaceutical company that has a revenue of $16.1 billion.

Customer purchase behavior

Information pertaining to the customer purchase behavior of these products is incredibly scarce. Even professional reports have noted a significant lack of data in this arena. In searching for this information, we exhaustively analyzed publicly available consumer reports, industry reports, and company reports, but barely any consumer insight could be located which directly addresses this topic. However, we were able to locate the following related data points which might prove to be additionally useful for you:

-- The bitumen market was worth 66.10 billion USD as of 2015 and "is expected to witness significant growth over the next eight years owing to increasing use in various applications including roadways, waterproofing, insulation, and adhesives."

-- The sulfur industry is seeing "increasing demand from the fertilizer manufacturing sector" and "increasing usage of sulfur for vulcanization of rubber" which are "the main factors driving the growth of the global sulfur industry."
- "In 2016, the agrochemical industry occupied the largest share in terms of sulfur consumption."

- Bitumen is available for sale online. Costs and volume seem to be dependent on the specific type of bitumen mixture being sold.

- Of sulfur consumed in 2015, "69% was obtained from domestic sources as elemental sulfur (64%) and byproduct acid (5%). The
remaining 31% was supplied by imports of recovered elemental
sulfur (20%) and sulfuric acid (11%)."

- Sulfur is the "most produced and consumed inorganic chemical, by volume."

- The agriculture industry is the leading consumer of sulfur, with a consumption volume of 7.0 Mt in 2015.

- Sulfuric acid for use in copper ore leaching is the third most common use of sulfur in terms of consumption.

- "Even though prices vary by location, provider, and type, the
Abu Dhabi National Oil Co.’s price is recognized as an indicator of world sulfur price trends. In 2015, the ADNOC contract price averaged about $145 per ton."

- It is believed by industry experts that the petroleum-refining industry is the leading consumer of recycled sulfuric acid.

Conclusion

The key customers of bitumen are the producers and manufacturers of the products that contain bitumen. Bitumen is very frequently used in the oil and gas industry as well as in the asphalt industry. Most companies who purchase bitumen are very large, and often are times global corporations. Information pertaining to the customer purchase behavior of these products is incredibly scarce. Even professional reports have noted a significant lack of data in this arena.
Part
04
of four
Part
04

The Procurement/Tender Process for the Bitumen/Sulfur Industry

There are four main ways in which bitumen/sulfur is procured and distributed: online, refiner suppliers, importers and tenders. In this report, we have described various procurement and tender processes for bitumen/sulfur. Additionally, we found that there are four key facets in innovation, customer life cycle management and experience management in this industry.

BITUMEN DISTRIBUTION AND CONTRACTS

There are four main ways in which bitumen/sulfur is procured and distributed.

The first way that it can be sold and procured is online. For example, Alibaba.com offers more than 6,500 bitumen products with over 6500 bitumen suppliers, most of whom are located in Asia, and specifically China. A small proportion of suppliers also come from India and the United Arab Emirates. Bitumen products are mainly purchased by China and by African and Southeast Asian countries. Alibaba.com ensures the safety of the product by certifying its suppliers with ISO9001 and ISO14001 certifications.

Argus Bitumen provides information, quotes and assessments on export and domestic bitumen markets in the Asia Pacific, Middle East, Africa and Europe. Customers may thus use this information to make decisions about procurement.

The second way that Bitumen/Sulfur can be procured is from refiner suppliers. Bitumen Iran, for instance, is a refiner who supplies the product to buyers. The company describes the purchasing process as the following. First, the buyer inquires about the product in terms of its grade and other purchasing details such as quantity, packaging, payment method and destination port. Thereafter, the seller will provide the buyer with a soft offer that contains the requested information. If the buyer accepts the offer, they send the seller a purchase offer on their company's letterhead. Upon receipt, the seller will issue a Performa invoice and/or draft contract. Once the buyer returns these documents to the seller, the contract will be amended if necessary and then signed by both parties. The Performa invoice must be signed and sent to the seller within 24 hours. Once the buyer makes the payment, the seller will ship the product as detailed in the contract or Performa invoice. The seller is responsible for costs such as VAT and inspection at the loading port, while the buyer is responsible for costs at the destination port.

Refiner suppliers include producers like ExxonMobil, Indian Oil Corporation, Marathon Oil Corporation, Petroleos Mexicanos Nynas AB, Sinopec, Nippon Oil Corporation, and Shell Bitumen. Shell Bitumen manufactures the product on five continents. It is a global leader in bitumen solutions. Shell Bitumen provides not only the product, but also technical advice and services to help their customers navigate regulations around the use of the product, manage risks, and grow their businesses.

The third way in which bitumen/Sulfur is procured is from importers who purchase the product from refiners and then distribute it. There are various websites that list importers according to the countries they import to. One such website is TradeKey.com. This website is a directory that connects global, verified bitumen buyers, importers and distributors.

The fourth way in which Bitumen/Sulfur is procured and distributed is through tenders. Tenders are allocated by international competitive bidding, and are used for bitumen procurement for large projects. Bitumen tenders can be found on tenders information websites. Tendersinfo.com provides tender information and allows one to search for global bitumen tenders.

Tenders for bitumen are advertised online. Miningreview.com for instance, describes that a tender process for the Addis Ababa City Roads Authority is done "in accordance with the open international tendering procedures." The exact bidding process is described in each respective tender.

For example, the tender process for the Addis Ababa City Roads Authority included:
— Engaging in sealed bids for bitumen to be supplied and delivered
— Following the outlined bidding rules
— Providing the required bidding documents
— Adhering to the closure date of the bid

An example of a company that procures its bitumen products through competitive bidding is Marathon Petroleum Corporation. This company expects its suppliers to honor its Code of Business Conduct and comply with environmental, safety and transportation regulations and laws.

The four above mentioned procurement processes show that intermediaries in the industry do exist, but also that customers can also go straight to vendors, refiners and producers of bitumen.

APPROACHES TO INNOVATION, CUSTOMER LIFE-CYCLE MANAGEMENT AND EXPERIENCE MANAGEMENT

An important part of bitumen procurement and distribution is that suppliers need to be innovative and provide bespoke solutions to meet unique customer needs. The ability to do this is key in customer life cycle innovation and customer life cycle and experience management.

Shell Bitumen for instance, provided Dubai airport with a highly specific product and service to meet its unique challenges and needs. The key innovations in this project included the development of a high-performance runway that could withstand the hot local climate for at least 7 years, and an uninterrupted supply of bitumen throughout the project. At the inception of the project, no such bitumen product existed, and so Shell's Bangkok regional technology center created one that met the required specifications. In addition, Shell's logistical capabilities ensured that there was an uninterrupted supply of the material throughout the project's duration.

Innovations and trends in customer life cycle and experience management can be understood by looking at the focus of major bitumen suppliers such as Shell and Exxon Mobil. Shell Bitumen's and Shell Sulphur's main focuses are on the following innovations:
— Consistently high product quality
— Supply reliability and security
— Price risk management
— Cutting-edge technical support
— Safety

In addition, In the state of Louisiana, USA, Shell Bitumen was granted self-certification status. This means that Shell now has an expanded ability to ship this product to customers faster, as well as provide assurances of product quality.

Exxon Mobil Asphalt and Bitumen focuses on similar innovations, which include:
— Consistent product quality
— Meeting industry specifications
— Extensive supply and manufacturing networks
— Logistics and production capabilities
— Leading technology which is achieved through their laboratories that conduct asphalt characterization tests, asphalt rheology tests and advanced research. They also comprise pilot plants that are used for formulation and process optimization.

Marathon Petroleum Corporation is a procurer, and has the following expectations of its suppliers:
— High ethical and safety standards
— Financially viable
— Value-added capabilities
— Understands Marathon Petroleum Corporation's business
— Quality processes and procedures such as ISO

From this research, can see that product innovation, consistent product quality and logistical capability are key facets in customer life cycle management and experience management. Moreover, a critical component is the ability to understand the customer's business and being able to supply unique and bespoke solutions.

CONCLUSION

To wrap it up, the procurement and tender process in the bitumen/sulfur industry is done in four main ways: online, and through refiner suppliers, importers and tenders. Various procurement and tender processes were outlined, and finally, innovations and trends in customer life cycle and experience management were outlined. These included product innovation, consistent product quality, logistical capability and supplying unique solutions.
Sources
Sources

From Part 03