2010 Asphalt Industry Forecast

The coming year holds much promise for the transportation industry - if Oberstar's six-year, $500 billion highway bill passes, that is. Of course, the highway bill is only one thing on this industry's plate.

Will the American Recovery & Reinvestment Act (ARRA) continue to stimulate transportation construction? What about the Highway Trust Fund's solvency problems? We posed these questions, and a few more, to some industry experts to get their opinions on what 2010 holds for asphalt contractors and producers. Here's what they had to say.

ARRA stimulus projects

AC: How do you see the American Recovery & Reinvestment Act (ARRA) affecting highway contractors and asphalt producers in 2010?

Alison Premo Black, Vice Presidentof Policy and Economist, American Road & Transportation Builders Association (ARTBA): "Funding from ARRA is going to help drive real growth in the highway, street and bridge construction market for 2010," says Black. "ARTBA is forecasting real growth of 8% for 2010."

Jack Basso, Director of Program Finance & Management for the American Association of State Highway and Transportation Officials (AASHTO): "The good news regarding ARRA was that highway projects were ready to go and stimulated the economy," says Basso. "At this point in time, 80% of the highway money is obligated.

"If you think of a bell curve, we're in the bottom half of the bell curve right now," he continues. "In early 2010, we'll be at the peak of the bell curve, which will bode well for the highway construction industry. But by the second half of 2010, we'll be moving down the curve again. By the end of 2010 and early 2011, stimulus projects will start to wane."

Kenneth D. Simonson, Chief Economist for The Associated General Contractors of America (AGC): "Stimulus money flowed quickly for highways, and there's still more to come," says Simonson. "Outside of highway construction, the stimulus funds have been a trickle.

"With the focus on quick, shovel-ready projects, asphalt has gotten a lot of the benefit of ARRA, but this stimulus won't be enough to stop the decline in construction in 2010. Private non-residential construction has dropped the last five months, down 10% from August 2008.

"Highway and street construction is up 3.1% from August '08 to August '09, but with current prices, you could buy more asphalt with the same money in '09 than '08.

"At best, highway construction will be level in 2010," he continues. "Stimulus dollars will be the main source of funding with state budgets getting cut."

Anirban Basu, Chief Economist, Associated Builders and Contractors (ABC): "Next year will be very similar to this year," he says. "The ARRA stimulus funds have had big benefits for highway contractors and asphalt producers. And there will be a positive impact for 2010, and well into 2011. After that, it's not so optimistic.

"State and local governments are in poor shape, and if not for the ARRA funds, they would be in worse shape," he continues. "With these funds, states were able to move forward with projects, and that created a wave of activity.

"After the wave passes," he says, "things will worsen, unless the highway bill passes."

The new highway bill

At press time, the United States Congress had signed a seven-week extension to continue funding for federal surface transportation until December 18.

This is the second extension for surface transportation funding since SAFETEA-LU - the current $286 billion, five-year spending program - expired at the end of September.

The new bill penned by James L. Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, asks for $500 billion over six years, which could be a boon to asphalt contractors and producers.

AC: Do you see Congress continuing to extend the highway bill? And if a new highway bill should pass in 2010, what effect will that have on the highway industry?