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State Construction Programs Reeling from High Steel and Asphalt Prices

Busted budgets have dominated news coverage of the region’s transportation projects. One major culprit? Rising commodity prices that have delayed the MTA’s current capital plan, megaprojects like the downtown PATH terminal and Second Avenue Subway, and even basic functions like road repaving, as the New York Times reported last month.

How bad is it? The U.S. Bureau of Labor Statistics’ Producer Price Indexes show that, since 2003, asphalt has more than doubled in price and steel has tripled. In the same period, the Consumer Price Index (general inflation) has risen only 18 percent. Rising asphalt costs are largely a function of the rising cost of petroleum, from which asphalt is made. Steel prices have been affected by rising global demand as well as an active local construction market.

State DOTs closely track the costs of steel and asphalt (and some other raw materials) to help gauge the expected cost of construction. In the tri-state region, each DOT publishes current price adjustments for contractors working on state projects. Below is a run-down of what each DOT is reporting:

Connecticut Department of Transportation
Asphalt: Up 232% from $180.50 per standard ton in early February, 2004 to $600 as of July 8 of this year.
Steel: Up more than 10% in just 7 months.

New York State Department of Transportation
Asphalt: Up 183% from $208 per ton in January of 2005 to an expected $588 in July of this year.
Steel: 42% increase in price for “semi finished steel mill products” between May 2006 to May 2008.

New Jersey Department of Transportation
Asphalt: Up more than 274% from $161.67 per ton in early 2004 to $625.00 in July of this year.
Steel: No data available.

[Technical note: Asphalt price figures in the linked New York Times article are noticeably lower than price figures listed by the DOTs, though they have still increased dramatically. This is because the NYT article is referring to asphalt concrete, the mix of petroleum-based binder and aggregate used in road resurfacing which is generally called “asphalt” in common usage. Strictly speaking, “asphalt” or “asphalt cement” refers only to the binder.]

Rising gasoline prices are finally forcing drivers to cut back, with VMT down nationally by more than 2 percent through April of this year and gas consumption declining by more than 4 percent through the end of June. This is news the environmental and transportation reform community has been waiting for. But it also means shrinking revenue for already cash-strapped transportation budgets, just as construction costs are growing. In the tri-state region, elected officials have been unwilling to support a gas tax hike or find other sustainable sources of revenue (see MTR stories from 7/26/08, 5/13/08, and 12/14/07).

As any homeowner will attest, deferring work on basic maintenance projects tends to push costs up even further in the long run. It is critical that elected officials throughout the region come up with more transportation dollars now.

Graphic: TSTC analysis of Bureau of Labor Statistics PPI data.

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building steel const
15 years ago

very informative post…

Louie Widney
10 years ago

Hello! I simply would like to give an enormous thumbs up for the good data you may have right here on this post. I will be coming back to your blog for more soon.

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[…] 2003 and 2008 the cost of asphalt doubled and the cost of steel tripled — and the gas tax has stayed a flat rate, regardless of the simultaneous doubling of gas prices. […]

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