May 28, 2008

Rising asphalt prices cut into Mississippi’s paving plans

Jackson, Miss.

The Mississippi Department of Transportation plans to spend between US$55 million and US$60 million on road overlays in fiscal 2009, up about USUS$10 million past few years, according to the Jackson, Miss. Clarion-Ledger.

But Mississippi Department of Transportation (MDOT) chief engineer Harry Lee James said that will cover fewer miles.

“Obviously, with crude oil going up, there’s a fairly close correlation to what a ton of asphalt costs. Five years ago it was US$35 to US$40 a ton. Now it’s US$75 to US$80, and I think we’re likely to see US$90 to US$100 a ton,” James said.

The agency is considering downsizing some road projects, including widening to four lanes sections of Mississippi 25 and 15 in northeast Mississippi.

“It’s just like your personal finances. You have to put off some purchases,” he said.

Less asphalt purchased puts another strain on manufacturers hit by higher energy costs and increased transportation costs for raw material and the finished product.

Dwayne Boyd, president of APAC-Mississippi Inc., oversees production at multiple asphalt plants. Liquid asphalt, which uses crude oil, represents the largest-cost ingredient in hot mix, a finished asphalt used for street overlays. By volume, it’s five per cent to six per cent. By cost, it’s 50 per cent. Trucking is more expensive, too. APAC has to ship in gravel and other aggregate for its asphalt and truck out the finished product. The cost of drying the aggregate with a natural gas burner has increased, too.

“There’s definitely less paving. In the private sector you’ve got the mortgage problems affecting things. The new subdivisions aren’t being built. In the municipal division, you’re spending the same amount of money, but it’s not going as far,” Boyd said.

Concrete road-building faces many of the same issues; the energy for manufacturing, transportation and steel reinforcing bars have all increased in cost.

Central District Transportation Commissioner Dick Hall said the dirt used in road construction used to cost US$1 per cubic yard.

“Now it’s US$6 to US$10 a cubic yard. It’s not the cost of the dirt, it’s the cost of the gasoline and diesel to haul it from the pit to the work site,” Hall said.

Asphalt prices started climbing after Hurricane Katrina, he said. The August 2005 storm temporarily knocked out oil production in the Gulf of Mexico, which contributed to a shortage nationwide, and gas price spikes.

“It’s to the point now where it’s really difficult to estimate the cost of a job,” Hall said.

MDOT contracts include fuel-price adjustments so the contractor doesn’t take the fluctuations on the nose.

“In just over 12 months we’ve spent US$27 million on fuel adjustments. That’s taxpayer money that’s just gone. It didn’t buy anything. That money went to Shell or Exxon or whomever,” he said.

Next year’s budget includes more than US$500 million in road building and resurfacing contracts but there’s no telling the toll oil prices will take.

“We have to identify the funding before letting the contract. We’ll just build as much as we can afford,” he said.

Jackson hasn’t finalized its list of streets to resurface this summer. Its yearly mileage has a decreasing trend from 41 miles in 1997 to 8 miles last year. At the same time, the average cost per mile has risen from US$39,000 in 1997 to US$250,000 last year.

However, not all in pavement is doom and gloom. Tone Garrett, executive director of the Mississippi Asphalt Pavement Association, said new formulations and materials are helping extend life and stretch dollars.

“When I first started in this industry, asphalt was lasting seven years. Now you can make asphalt that lasts 15 to 20 years,” he said.

“But it adds cost on the front end, and you have to buy special equipment to mix it,” he said. “If you do it in too small a tonnage, it’s not economically feasible.”

MDOT uses a program called Highway Enhancement through Local Participation, or HELP, to speed the funding process on certain interstates. Hall said each county issues construction bonds, which they can do faster than the state, and MDOT commits its own and future federal funding to retiring those bonds.

Ridgeland is accelerating its overlay program this year because it locked in a price for asphalt last September with a term bid.

Workers finished the city’s US$550,000 residential-street overlay program for 2008 and last week alderman approved another US$475,000.

DCN News Services

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