Sticky problem: Asphalt price up 27 percent - St. Louis Business Journal:

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The sharp rise also means the statde and many local governments and commercial developeres will have to cough up more cash to coveer escalating costs passed on by theirt contractors whouse asphalt. Costs of the material rose from $43 a ton to $55 a ton July 1, a one-dagy increase not seen in decades, according to local constructio experts. The spike was fueled by the skyrocketinh price ofcrude oil, from which liquix asphalt, a sticky, heavy sludge that workz as a binder, is Leading suppliers of the liquid locally are two oil facilities in the Metro East operated by petro-giants and while large producers of asphalt cement includew Creve Coeur-based , Overland-based and Brentwood-based "Thes price of liquid is $620 to $680 per said Larry West, president at N.
B. West "Around this time last year, it was $296 a Although liquid asphalt, whic h is the lowest byproduct of the crudre oilrefining process, accounts for only about 5.5 percentf of a ton of asphalt cement, it comprises 80 percentr of the cost. Thus, crude oil prices, whicbh have quintupled in the lastfive years, have a directf bearing on asphalt cement costs. Among the largestf local projects expected to consume a lot of asphalty isthe two-year Highway 40 reconstruction being undertakejn by Gateway Constructors, a coalition of including ; Fred Weber Inc.; of St. and Pasadena, Calif.-based .
Gateway spokesman Dan Galvin saidthe 11-milw reconstruction of Highway 40 is mainlyg being built with concrete but will also consum 100,000 tons of asphalt. Costs for the wholre project were fixedat $535 million when awarded by the he said, so Gateway will have to bear any extrw costs. "We don't have an escalatiohn clause inthis contract, and any time a materiao cost goes up 23 percent, it'sd going to get your Ultimately this is going to cut into our profit margin," Galvin Travis Koestner, assistant state constructio and materials engineer at said the state uses about 3.5 millionj tons of asphalt annually, which cost $166.2 million last at the average price of $47.
50 a ton. For the first half of this MoDOTpaid $53.60 a ton. Koestnere said MoDOT plans to complete all the project it already hascontractee out. Going forward, though, there are concerns aboutf road maintenance and improvements becausefundint -- mainly derived from gasoline and diesel salesw taxes -- is not keeping up with escalatingy costs. "We do anticipate but the inflation we are seeinvg now is abig jump," Koestner "Overall funding is an The funding stream is going down as construction pricesw go up.
" Koestner said nearly all contractors who do paving work for MoDOT can pass on additional costz of asphalt to the state, based on a monthly index of pricess the agency has been compiling since 2006. That indesx shows liquid asphalt priceswere $501.25t a ton in June, compared to $297.50 a ton in January. Briam Goggins, president of , one of St. Louis' largesg paving companies, said current asphalt prices are the highest he has ever The July 1 price hike is he said, and is forcinf him to renegotiate contracts the company signeds months ago.
"In the majority of contracts, we can pass on the price s toour customer, but we have to go back to thosed customers and renegotiate," Goggine said. At Pace Construction, which produces 800,000o to 1 million tons of asphalt President Phil Hocher has adjusted to rapidly rising prices by biddinhg only on contracts that alloqfor short-term pricing. "Youj are seeing inflation in everything in Hocher said. "When we bid on a project, my pricr is good only on a monthly basis." Among the major contracts being undertaken by Byrne & Jones is the construction of a $2 millionj parking lot at the $60 million Meadows at Lake Sainr Louis shopping center.
Goggins said the companyg is working as fast as it can to complete the project before asphalft prices increase againnext month. The escalating pricde of asphalt is a nationwide phenomenon that will saidKen Simonson, chief economist with the Associatesd General Contractors of America, a constructioh industry trade group basesd in Arlington, Va. One of the factora driving prices throughthe roof, he said, is the developmeng of new cokers that allow some U.S refineriess to extract more fuel from liquid asphalt, which normalluy sits at the bottom of the cruder oil refining process.