Asphalt Manufacturing

The major industrial focus of asphalt manufacturing is on the production of paving and roofing products, including asphalt and tar-paving mixes and blocks, shingles, roofing cements and coatings. It seems that the level of industry performance depends to a large extent on the level of construction and transportation infrastructure building.

Since industry income tracks the total construction market, and prices of raw materials alter, revenue is expected to increase as raw materials become more expensive. In 2020, the COVID-19 (coronavirus) expanded internationally, causing it to infect all 50 states in the United States. As a result, there have been significant oscillations in the global macroeconomic climate as a result of the virus spreading.

Additionally, macroeconomic drivers (i.e. decreases in interest rates, improvements in energy and labor market trends, etc.) have caused sector revenue to decrease by 2.9% by 2020 on their own. However, although industry revenue has risen overall, it has done so at a slower pace throughout the five-year period through 2021, growing at an annualized rate of 2.2% to $27.2 billion. During this time, 3.7% of this rise occurred in 2021 alone.

Based on expected industry profit margin of 6.9% of sales, industry profit margin, as defined by profits before interest and taxes, is estimated to account for 6.9% of revenue in 2021. A crucial input in the production of asphalt products, such as gasoline, has a big role in the overall price of industrial items.

Due to enterprises suffering huge losses in oil prices at the beginning of the current period, they were obliged to drop pricing, which resulted in reduced income for the industry as a whole. However, residential building, which represents a substantial downstream driver for the sector, has seen a solid increase in value, as shown by the fact that sales volume has remained constant. According to calculations, the market for residential construction is expected to have an average growth rate of 2.5% annually over the next five years.

Over the next five years, industry is predicted to increase, though at a faster pace than in the present era due to building markets that have seen declines due to the impact of pandemic diseases. According to budget projections, federal funding for roads is predicted to rise at an annualized pace of 2.7% between 2019 and 2026.

This growth is due to improving state and local government budgets, which generate more tax money available for highway infrastructure construction. On the other hand, residential and nonresidential building activities are also predicted to expand. As demand for industry goods grows over the next five years, industry income is projected to climb by 2.1% each year, increasing to $30.2 billion by the year 2026.

Even though COVID-19 (coronavirus) headwinds were a deterrent to industry demand, the asphalt manufacturing business has had consistent demand over the next five years. Because the price of other alternative materials, such as cement, has become more volatile, the demand for paving and roofing asphalt products has decreased marginally throughout the present time, therefore limiting industry income.

In addition, the COVID-19 (coronavirus) pandemic has produced an increase in volatility in downstream markets, further contributing to the decrease in industry demand. Housing starts, which serve as a vital accelerator for the operations of many industries, have risen at an average pace of 4.5% over the last five years, but have grown by 5.5% this year alone in the face of the pandemic.

As a result, research projects that industry sales will climb at an average pace of 2.2% to $27.2 billion during the five years to 2021, with a 2.9% decrease in 2020 alone. Industry income is expected to rise 3.7% in 2021, and will help fill the gap caused by the cessation of the recall of COVID-19 (coronavirus).

In addition to providing a solid surface, asphalt paving materials help to create and maintain road infrastructure and structures. Paving asphalt is an affordable, simple process and can be installed on a roadbed easily. It is also repairable at a moment’s notice.

Although it is just around 10% of all roadways, asphalt roads account for more than 90% of the country’s road infrastructure. This means that asphalt’s relatively cheap cost and outstanding resistance to the weather also make it a suitable roofing material. The primary benefit of asphalt-shingled roofs is that they are often found in most American houses, and asphalt-coated flat-surfaced roofing is also rather common.

As demonstrated by the yield on the 10-year Treasury note, the federal interest rate has dropped over the time. With credit markets tightening up as the economy strengthens, financial conditions have improved. It is expected that this trend, which cuts mortgage and corporate financing costs, would assist in the expansion of industry.

Though it is highly unlikely that interest-rate declines will aid construction growth, given the pent-up demand for houses, office space, and commercial and institutional buildings over the past five years, it should be noted that construction overall will benefit from this gradual decline in interest rates.

There is an endless market for asphalt-based goods in the road infrastructure and building industries because of the basic use of asphalt in these markets. However, it is equally important that this sector be supported by the demand from these markets, since they have few other potential applications.

Accordingly, the overall industry performance is driven by the health of the Construction sector, as well as the amount of government expenditure on road infrastructure. During the most recent time, the value of residential building has grown while the amount of money dedicated to new roadway development has stayed constant. Residential construction is expected to rise at an annualized pace of 2.5% throughout the present term.

Industry items have shown to be in high demand, even after the five-year period during which that demand has been steady. These constant and predictable demand levels are attributable to strong demand from residential and nonresidential construction, as well as the consistent and predictable levels of government spending on road and highway infrastructure, although some government spending declined in 2020 as a result of the coronavirus pandemic.

This virus has triggered a worldwide financial crisis because of the extreme volatility in global financial markets as a result of the spread of the virus in 2020. Benefits have been realized by industry participants due to the Fixing America’s Surface Transportation Act that was passed in December of 2015. Investing a total of $305 billion on roads, public transit, rail, and other public infrastructure overhauls is something that will take place over the next three fiscal years, with the greatest investment expected between fiscal 2016 and fiscal 2020.

The emphasis on infrastructure, in addition to a positive trend in industry development, might further boost industry growth in the near future. Additionally, since the inauguration of the Trump administration in 2017, no significant advances have taken place.

Input prices greatly impact industry income; for example, when operators increase and reduce prices in reaction to swings in the price of crude oil, the industry raises and lowers its income. As far like oil prices are concerned, over the next five years they will decrease dramatically as they fell after their all-time high a few years previously to the present era. This drastically limited revenue growth as industry operators were obliged to decrease their selling prices, which caused revenues to fall almost entirely throughout the duration of the study.

The sector has had consistent demand, which has necessitated a significant expansion of its activities. During the five-year period from 2011 through 2015, industry establishments have decreased by an annualized rate of 0.4% to 1,547 firm sites, and these projected declines will slow to 1.4% by 2020. Most asphalt producing plants service a relatively narrow geographic region, and so service relatively few firms, with less than half of them having more than five workers.

As the number of small, local producers has grown, the number of industry employees has increased by a rate of 2.1% per year over the next five years and will result in a 27,765 job increase by 2021. This estimate assumes that there will be no increase in 2019 but an expected decrease of 1.5% in 2020 owing to the coronavirus pandemic disrupting industrial operations.

International commerce plays a relatively limited role in the business, with imports forecast to meet just 2.0% of domestic demand in 2021 while exports are expected to account for 1.3% of industry income in the same year. There are several reasons why these numbers are what they are. First, hot-mix paving asphalt, the most prevalent kind of paving asphalt, must be manufactured within 15 to 25 miles of its destination to prevent hardening before it is applied to a roadbed.

Over the five-year period from 2013 to 2021, industry exports are estimated to be valued at $364.6 million annually, at an annualized rate of 8.2 percent. The industry principally specializes in exporting warm- and cold-mix paving asphalt. Greater than half of these goods, which can be carried further than hot-mix asphalt, have seen greater utilization, and that has enabled more cross-border commerce with Canada and Mexico.

The $557.7 million yearly growth in imports is occurring when imports have only climbed by 9.9% each year on average over the next five years. The current low domestic oil prices mean that the purchasing prices for domestic clients decrease, thereby reducing the motivation to import products.

From 2016 to 2021, industry profit, which is simply defined as the profits before interest and taxes, has been falling from accounting for about 8.9% of the total industry sales in 2016 to around 6.9% in 2021. Despite this, industry profit is still larger than it has been historically. Prior to the present time, industry income has been rapidly increasing due to customers and the federal government both making major investments in initiatives that have supported the U.S. economy.

Therefore, industry demand increased, which allowed industry operators to charge higher prices for industry items and generate larger profit, and this tendency continued earlier through the time. By 2021, industry profits are expected to be solid as operators benefit from the price of crude oil decreasing in price. Unfortunately, revenue growth is projected to be restricted since asphalt makers are going to drop prices to maintain profits in the face of decreasing buying costs.

The residential and nonresidential construction markets are predicted to recover from the lows caused by the detection of COVID-19 (coronavirus) and rising government spending for roads, hence stimulating development in the Asphalt Manufacturing business. In the context of long-term forecasted figures, industry revenue is predicted to rise at an annualized pace of 2.1% to $30.2 billion over the next five years.

The building markets that the industry views as primary downstream destinations are projected to have considerable expansion over the next five years. Demand for industrial goods is expected to be notably high from the residential building sector, which is expected to rise at an average rate of 2.7% per year over the next five years.

After growing at an annualized pace of 0.7% over the same period, housing starts are forecast to rise by 0.7% over the course of the year. Most of these new houses are likely to be equipped with asphalt shingles. Similarly, the demand for asphalt roofing materials is forecast to grow at an annualized rate of 2.8% over the next five years, which is one of the main causes of a projected rise in private nonresidential building.

From 2015 through 2018, demand for paving asphalt is expected to rise by almost 10 percent each year. According to projections, state and municipal governments are predicted to boost their budgets as the economic recovery brings in more tax money.

To put it another way, these governments will see a rise in the need for paving asphalt for state and municipal road building projects, due to which they will have to raise financing for roads. The planned development in building, which entails the use of paving asphalt to create driveways, parking lots, and other paved surfaces, is also predicted to help spur the usage of paving asphalt in the future.

The expectation is that industry income will go up during the next five years, meaning that the number of industry establishments and personnel will also expand. Over the next five years, total industry establishments (based on independent operators and affiliated operators) are projected to increase at an average pace of between 1% and 1,626 new sites a year. Over the next five years, both new and existing firms are likely to increase their operations, and industry employment is predicted to increase at an annualized rate of 1.9% to reach 30,526 people by the year 2022.

Paving asphalt is made more easily transported due to the development of US-style asphalt-coated roofing shingles. This, in turn, will increase the value of exports, which are expected to rise at an annualized rate of 2.3% to $409.3 million over the next five years, and increase the value of imports, which are expected to increase at an annualized rate of 1.9% to $613.6 million over the same period.

It is predicted that the amount of commerce between industries would remain small in the future, with exports likely to contribute $78.2 billion, or 2.0% of the total, while imports are estimated to account for $87.2 billion, or 1.4% of domestic demand. These growths are responding to large-scale decreases in the international commerce of coronaviruses by 2020.

Manufacturers of asphalt will likely be able to keep pricing and profitability stable due to increased demand for asphalt, particularly given the high building and infrastructure investment. Growth in downstream demand for industry goods is predicted to allow industry operators to boost prices, but this will likely be offset by growing input and labour costs. It is projected that the industry’s biggest asphalt roofing product manufacturers would take advantage of the uptick in building activity over the next several years and enhance their market share.

The nature of these producers’ goods allows them to do this operation quickly and more easily than asphalt paving mix makers. Unlike asphalt paving mix, asphalt roofing materials do not need the use of locally produced resources. A corollary of this is that major asphalt roofing producers may ramp up production in response to growing national demand, as they now have more ability to buy enterprises in other areas. It is also true that asphalt roofing goods have a greater degree of product differentiation when compared to asphalt paving materials.

Industry profit, which is profits before interest and taxes, is predicted to decrease by 0.6% in the following years, accounting for 6.5% of sales in 2026. When the government budget grows, they will likely be more inclined to invest more money to construct concrete roads that will stand up for a longer period of time.

The price of crude oil is predicted to climb annually at an annualized rate of 4.4% during the next five years, with the crash and rise of the global price of crude oil acting as a buffer in between. Since the most essential input in all industry output is a refined form of crude oil that’s obtained via the processing of crude oil, an increase in crude oil prices is likely to result in an increase in industry input costs, diminishing profit.