Bitumen supply chain operating effectively – Waka Kotahi

In News4 MinutesBy NZ Trucking magazineApril 6, 2023

A recently completed review of the bitumen supply chain has provided reassurances that the import market is operating well, according to Waka Kotahi.

The transport agency said this is expected to continue even after majority importer Z Energy exits the market later this year.

Waka Kotahi group general manager of transport services, Brett Gliddon, said the review process sought feedback from key suppliers and the wider industry on local and international market conditions and the risks and opportunities with four key outcome areas – the future security of supply, quality of supply, competitive market and pricing, and fair access.

“The feedback from industry has provided us with comfort that the open import market has been operating effectively since the switch to a solely imported product in 2021, when domestic production ceased at Marsden Point refinery,” he said.

“To ensure the outcomes Waka Kotahi and other users require from the market are delivered, we’ll continue to monitor and review how the supply chain is operating under our mandatory quality standards, which includes requiring refineries to make an application to supply and then monitoring compliance to specifications later at storage facilities around the country,” said Gliddon.

“The standards apply regardless of whether the core product is produced domestically or imported, and we’re not aware of any issues with quality to date.”

Further engagement with industry underway

Bitumen is an essential, strategic commodity for Waka Kotahi and other road-controlling authorities, who together account for more than 90% of all bitumen used in New Zealand.

Waka Kotahi launched the bitumen supply chain review when it was announced by Refining NZ that it would cease onshore production of bitumen at Marsden Point Refinery in 2021. Before this, bitumen was sourced from both local and international sources.

Z Energy has been the majority source of imported product ever since, but has announced it will exit the market in mid-2023, meaning bitumen will need to be sourced from other suppliers in the future.

As part of the review, Waka Kotahi engaged with key stakeholders, including importers, traders, storage tank owners and roading contractors, and looked at various potential import options and international market insights. The review team found that there is confidence in the security of supply of bitumen under the full import market model, and in the ability to monitor quality and trace it through the supply chain, given the mandatory quality standard Waka Kotahi has in place.

Gliddon said Waka Kotahi is confident that the open market model will continue to provide competitive pricing and fair access to product, and that there is the potential for new suppliers to enter the market.

The transport agency is now engaging further with industry to finalise details of its updated pricing adjustment mechanism, which needs to move from using the international Z Energy list price to another international index.

Waka Kotahi said it will continue to work with its supply partners to monitor and review the market against its key outcome requirements in the future.