Positive Indications

Plan on a healthy highway construction season in 2007.

While some Northern asphalt producers and contractors may have a few remaining good weather days to wrap up a project, most are busy repairing equipment and/or looking at new equipment investments in preparation for next year's work. And despite the challenges the industry faced this year — rising oil prices, which created an exorbitant spike in the price of liquid asphalt, along with higher costs tied to the fuel required to operate plants and paving equipment — the transportation construction industry experienced a strong 2006.

The American Road and Transportation Builders Association (ARTBA) expects an estimated $105 billion of construction work to be completed this year on highway, bridge, transit, airport and water projects, up from $92 billion in 2005. According to ARTBA, most of the increase has been tied to highway and bridge work.

Next year should provide continued growth, with a 10-percent increase in federal highway funding, along with continuing recovery of state and local government budgets. That recovery will allow states to use funds dedicated to highway projects, rather than financing other budget needs.

Hopefully, declining oil prices during the fall will translate into savings for asphalt producers and contractors in 2007, and not just a reprieve at the pump for consumers. Realistically, asphalt producers and contractors have learned that the price volatility of crude oil will continue to wreak havoc on their ability to operate profitably unless a long-term solution is realized.

Take a look at our special report on "Dealing with high oil prices — Tools to manage the high cost of liquid asphalt," (page 74). We think it may help you plan your upcoming construction season. Road agencies will need to consider changes in mix designs — allowing more reclaimed asphalt pavement to be used to reduce the amount of liquid asphalt binder and virgin aggregate required to execute a project, or using larger aggregate (like a Stone Matrix Asphalt mix design) that requires less binder to hold it together — if they want to complete projects with the dollars budgeted. Asphalt producers and contractors know they can provide those solutions to meet the cost-effective quality needs of their customers while keeping their own costs down.

The price of construction materials for highways and bridges has gone up considerably over the past three years, a whopping 35 percent, according to ARTBA. Those increases have gobbled up approximately half the 15 percent increased growth in construction spending this year, but industry leaders will continue to search for ways to address rising material costs in order to deliver this country's transportation needs in the most cost-effective way possible.

So plan on a healthy highway construction season in 2007 and continue to work with your road agency customers in developing solutions that are mutually beneficial.

Greg Udelhofen, Editor