In his eighth annual appearance at WOC, Ed Sullivan, chief economist for the Portland Cement Association (PCA; Booth C4221) veered off from his typical economic forecast to indentify a market that the concrete industry needs to gain a stronger foothold: road paving.
“We have the advantage,” says Sullivan, who cites increasing oil prices and changes in the oil-refining process that have forced asphalt prices up, thereby leveling the playing field for cement/concrete contractors. “The stars are aligned to take the market share.”
Not only do concrete roads last longer—you’d have to replace an asphalt road two or three times before you’d have to replace a concrete road, says Sullivan—but now they also have an initial bid cost advantage over asphalt.
This is an important point to press with cash-strapped transportation and highway departments. Similar to last year’s forecast, Sullivan does not anticipate state government deficits to end until some time in 2013. The surpluses won’t be large, and may be eaten up by federally mandated Medicaid spending. Whatever states have left over, however, will most-likely be used to invest in new construction—as there’s an urgent need to replace aging infrastructure.
The opportunity to make headway in the paving market is also a “tinge of optimism” for the concrete industry, which was first cut down to the bone (as stated in Sullivan’s forecast two years ago), and has recently shown some productivity gains only through layoffs. For real, structured healing (of both the industry and the economy), more jobs need to be created. How fast or slow the healing process is, says Sullivan, depends entirely on job creation.
The challenge will be in convincing state departments of transporation (DOTs) and other decision-makers that concrete is the cost-effective paving alternative. “They must recognize that we’re not in [preOPEC] 1973 where concrete was not as competitive, and they must accept alternatives to asphalt and allow for alternative bidding,” explains Sullivan.
Since 2005, liquid asphalt prices have increased annually 12% and concrete only 4%—yet some state DOT procurement practices hinder “free market” economics. Policies that include escalators, non-use of alternative material bidding, flawed life-cycle cost analysis calculations, and the lack of equivalent paving design are slowing concrete’s penetration of the paving market and costing taxpayers billions of dollars.
As an example, Sullivan pointed out a recent battle local decision-makers had over a 6-mile road in Corpus Christie, Texas. The question was whether to make the road concrete or asphalt. Even though analysis showed that concrete would be cheaper, proponents for using the material only won by a narrow vote.
“In order to get our share of the market, we’ll have to undertake these sorts of battles over and over again.”
But the effort will be worth it, if more contracts can be secured and new jobs created.