Uruguay: Ukraine war hinders Russian asphalt import and disrupts road works

RIO DE JANEIRO, BRAZIL – Uruguay imports from Russia two product divisions: fertilizers -most of them- and bitumen and asphalt -about 36% of the total-.

The latter is widely used in road infrastructure construction, especially under the Public-Private Participation (PPP) regime. The PPPs have a tax benefit that exempts them from paying Internal Specific Tax (Imesi) and consular taxes for these purchases.

Consulted by El Observador, the director of the construction company CVC, Alejandro García, said that his company will not be affected because they bought asphalt for the whole year between December and January. “I don’t know if it was luck or what,” but “I know that some colleagues are running out of asphalt,” he said.

“Russian ports are closed, so for the moment, we are on stand-by waiting for the war to be resolved,” commented Claudio Kroger, general manager of Bitafal, an asphalt supplier in Uruguay. He also added that in any case, “there will be no shortage of the product here in Uruguay” and that “beyond having stocks or not, it can be produced at the Ancap refinery.”

Although buying Uruguayan asphalt means losing the import tax benefits in the case of PPPs, Kroger considered that Russia could be substituted as a supplier. “In the region, Iran, the Middle East, the United States… there are other suppliers, don’t think it is the only one,” he said.

Of asphalt and other petroleum derivatives of similar uses, Uruguay imports 49% from Russia, according to customs data. The other half is divided between the United States (34%), Colombia (14%), and the rest is brought from Brazil and Argentina (3% between them). The main importing companies are headed by Ancap, which represents almost half of the purchases abroad (49%), followed by Stalori (27%), Grupo San José (15%), and Grupo Vial Oriental Dos (7%).

On the other hand, the director of Bitafal explained that since asphalt is a petroleum derivative, its price is linked to the fluctuations of petroleum, which is currently at historically high levels.

“Another problem we are all having is the freight costs of supplies,” added another source in the sector consulted by El Observador. “Freights that used to cost around US$1,000 are now at US$15,000, to say the least.” The construction industry must also deal with the rise in other costs such as steel and aluminum. The price of steel increased between 15% and 20% after the outbreak of the war between Russia and Ukraine. Structural steel is used in all construction, which harms the entire industry.

While the Russian economy does not fit the bill for the “superpower” moniker, it is critical supplying several vital raw materials, such as fuels, metals, and minerals. In the past year, the price of aluminum has doubled, according to Investing.

The London Metal Exchange (LME) suspended trading in nickel on March 15, the price of which briefly rose above US$100,000 per tonne due to the risk of shortages if Russia is unable to export its production. Russia is the world’s third-largest nickel producer and the leading producer of primary nickel products, such as refined nickel needed for electric vehicle batteries.

“A problem is being generated in construction sites and companies, which some can move in parametric and others cannot. So, a huge problem is being generated,” warned the source.