Like any industry in a changing global economy, asphalt producers and contractors face a range of challenges, some obvious, some not so much. Here are five somewhat overlapping issues you should keep a close eye on:
Labor: The shortage of skilled tradespeople is a nationwide dilemma, and because “the war for talent” is being waged on so many fronts, it’s become particularly difficult for the construction industry in general–and the asphalt producers and contractors specifically–to recruit and retain sufficient labor to meet productivity demands and quality standards. It’s not a new problem. “The skilled labor shortage has been consistently identified as a major issue facing the [construction] industry, but it is now reported by 80% of contractors to be impacting worker and jobsite safety. In fact, the Q3 report found that a lack of skilled workers was the number one factor impacting increased jobsite safety risks (58%),” reports ForConstructionPros.com.
Whose fault is that?
TWP Asphalt makes an interesting but unpopular point: “If an asphalt paving company … is worried about the amount of people they will be able to hire in the coming years, they should look inward. Start offering better salaries, offer more training and ensure that workers feel valued. When someone has a workers’ comp case, ensure they are treated properly. When companies start doing the right things, they will have no issues getting the work they need.”
Funding: According to the National Asphalt Pavement Association, “65 percent of the asphalt pavement market is publically funded highway projects, with residential and non-residential construction making up the remaining 35 percent. Capital spending on highways, roads, and bridges by all levels of government (federal/state/local) totals about $80 billion annually, about half of which comes from federal funding.”
In February, the administration released a 55-page legislative outline of its proposed $1.5 trillion infrastructure plan that includes $100 billion in federal infrastructure grants to city, county and state governments, as well as various block grants for specific areas and projects. That sounds lucrative, but questions remain. How much will be allocated to highways and bridges? Will state and local governments invest in big-ticket infrastructure projects in order to qualify for federal funds and grants? As journalist Laura Bliss warned in CityLab, “This is not a spending plan, but a financing idea.” Will the necessary funds actually materialize?
Materials: According to NAPA, “Roughly 3,500 asphalt mix production sites operate across the United States, producing about 350 million tons of asphalt pavement material per year. Most of these production facilities are small, family-owned businesses that employ the many workers who build America’s network of highways and roads.” But will those producers be able to find the raw material supplies they need to produce enough asphalt to pave the nation’s streets, roads, bridges and highways, not to mention airport runways, parking areas, walking and biking trails?
Here’s why it should be a serious concern.
In 2015-16, the US experienced a mini-recession, described in a recent analysis in The New York Times as “a sharp slowdown in business investment, caused by an interrelated weakening in emerging markets, a drop in the price of oil and other commodities, and a run-up in the value of the dollar.”
Oil and commodities prices plummeted, dragging down spending in certain industrial sectors along with it. “Spending on agricultural machinery in 2016 fell 38 percent from 2014 levels; for petroleum and natural gas structures—think oil drilling rigs—the number was down a whopping 60 percent.” At the same time, “The oil and gas exploration boom tied to fracking technology came to a halt with energy prices at rock-bottom levels, and with it sales of equipment tied to that boom.”
Oil refineries across the country closed, decreased output, or went idle. Now, with only 135 operating refineries left, many of which are not equipped for asphalt-grade runs, and oil prices now at a four-year high, mom-and-pop asphalt producers will be facing stiff competition for raw materials.
Trucking: The trucking industry in general faces a severe driver shortage and an uneasy adjustment to strict new ELD regulatory standards and restrictions. That creates higher freight prices for everyone. Transporting asphalt mixes has never been easy or inexpensive. These glitches in the overall transportation markets mean that it is becoming increasingly difficult to control delivery times and distances, load temperatures, product integrity and, of course, costs.
Technology: The World Economic Forum predicts the construction industry will undergo a digital transformation over the next decade, with the potential to save $1.2 trillion globally due to its increased efficiency and productivity. But for too long, our industry has kicked the digital can down the road. For HBM contractors, haulers, producers, and suppliers–already facing complexities like new tariffs on building materials, tighter regulations and stricter proof of compliance, compressed schedules, and higher customer expectations–sticking with paper-based processes is like throwing in the towel.
In contrast, automating basic processes speeds job cycles; documents orders, deliveries and payments; monitors and validates compliance; streamlines audits and quality controls; and encourages information-sharing and collaboration among all construction stakeholders.
Going digital paves the way toward a safer, more efficient, more profitable HBM operation.
Apex from Command Alkon streamlines the business processes and operational tasks necessary to ticket and scale bulk products including aggregates, asphalt, and cement. Apex Asphalt ensures the production and loadout of a quality product.