As the oil industry is adapting to changing economics, asphalt, the “bottom of the barrel,” is becoming less important to the major oil companies. Asphalt has generally been viewed by refiners as just that, the “bottom of the barrel,” not their primary interest. So what’s going to happen to the industry that needs asphalt for its roads?
There was a time when the major oil companies, with names like Exxon, Chevron, Shell and Texaco, were the primary reliable sources for asphalt and asphalt-based products. Their personnel staffed the expert task groups and industry organizations that fostered research, innovation and quality of asphalt products. The second-tier companies, those with tankage and storage capacity and regional placement, played the role of brokers or traders, buying and selling off of the spot market using telephones and calculators as their primary business resources to fill in between the majors. But as the entire petroleum market shifted and the big boys exited the field, these brokers became the primary source of asphalt to the marketplace.
Crude gets complicated
This came about with the advent of increased oil prices and alternative income sources for asphalt feed stocks. Refiners use whatever crude sources optimize their profitability, without regard to the effect on residual asphalt quality or availability. In today’s market, those crude blends can change frequently. Most refiners have invested in cokers, ROSE units and other refining methods to increase fuel production, at the expense of asphalt. Additionally, there are far fewer refineries that produce asphalt today than there were 20 years ago.
Further compounding the situation is the realization that asphalt quality is determined by its chemistry, and that chemistry is a direct function of the crude source and the refining method. Today’s new, high-performance asphalt blends are no longer just two or three grades with very broad specifications. Rather, they are dozens of sophisticated formulations requiring high-end source materials with modifications. This situation is even further exacerbated by the new Strategic Highway Research Project Performance-Graded specifications that require new methods of compounding and modifying asphalt materials.
All these factors have resulted in some major disconnects in the supply and demand equation. Contractors and suppliers now find themselves unable to make or meet specifications and contracts, supply commitments or delivery schedules for consistent asphalt products to their end users. This, in turn, is putting departments of transportation (DOTs), departments of public works (DPWs), municipalities and other road owners into a real dilemma.
At the same time, our nation’s road infrastructure, built during the 1950s and ’60s, is aging. The costs of asphalt, aggregate and construction are rising. Environmental concerns are making permitting for new quarries and manufacturing facilities difficult (if not impossible), and the traffic loads on the existing streets and highways are rising exponentially.
These changing dynamics have led the major oil companies to either downsize or completely disband their asphalt research groups and efforts for innovation. This is creating an increasing need for special, innovative asphalt producers and service providers for both corrective and preventive maintenance, as well as rehabilitation and recycling, all better utilizing both new and existing road materials.
With oil companies now more focused on optimizing profits of their higher-end products, the opportunity arises for those early-market brokers to play a more prominent role in this vital, vertical market. They now have the opportunity to better fill this need for asphalt suppliers who take specifically selected asphalt feed stocks and deliver more cost-effective, higher-quality asphalt products. This, in turn, enables national, regional, state and local agencies to provide taxpaying drivers with sound, smooth and well-maintained roads.
MAC’s attack
In response to this need, a major player in this middle market of asphalt feed stocks, Martin Resource Management Corp. (MRMC), decided to do something different. They put together multiple supply terminal locations, a multimodal transportation and distribution network and technical support personnel in a new, integrated business model to provide “Everything Asphalt” to this previously fractured supply chain. To manage and deliver this new model, they created Martin Asphalt Co. (MAC), a Houston-based company, as the newest member of the MRMC family of companies.
By integrating the supply, distribution and delivery elements of the process under one umbrella, and backing its production and blending facilities with an AASHTO-certified laboratory providing R&D, quality control and custom-blending support, MAC now provides the Texas market a single source for “Everything Asphalt.”
With the second largest asphalt market in the country, Texas is a logical place to introduce this new concept. With southeast Texas accounting for a major portion of the state’s entire asphalt and asphalt products market, it is here the new model is being introduced and integrated into the marketplace.
The company’s top-to-bottom integrated approach provides contractors, DOTs, DPWs, counties, municipalities and other asphalt and asphalt-based product providers and users a host of benefits. These include an assured supply of what they need, when they need it and at a price they can count on. While other suppliers have come to treat and provide asphalt as a byproduct of their primary business (with accompanying lack of predictability), this new player in the Texas market comes with a focused, integrated model designed to provide specifically sourced and placed asphalt and asphalt-derivative products and services by design.
MAC has five manufacturing and supply facilities on or near the Texas Gulf Coast and a distribution network throughout southeast Texas. “You now have a single source for ‘Everything Asphalt,’ because that’s what we do,” said Bill O’Leary, vice president for MAC. “Refiners no longer make asphalt as their primary product, but we do. We can control our output because we have the relationships, terminals and transportation to bring into our system the raw materials needed to produce the products our customers want and need. Given our experience in this market, we often know more about what our client needs and the construction techniques he’ll be using than he does. In addition, we provide training and educational seminars on the uses of the products we produce, where another supplier may not even understand the specifications for the product they’re selling.”
O’Leary has dedicated most of his professional career to the advancement of the asphalt pavement and asphalt emulsions industries. As a long-time member, and two-term president, of the Asphalt Emulsion Manufacturers Association (AEMA), he’s overseen the implementation of cutting-edge technologies into the manufacturing, application and preservation of asphalt products and derivatives across the pavement industry, both domestically and internationally. He currently serves as president of the Foundation for Pavement Preservation (FP2), an industry advocacy, research, technology and education organization, and is an active industry participant in various committees, task forces and implementation arms of the Transportation Research Board.
Members of the company’s customer sales/service/product applications team are active players in several aspects of the asphalt pavement industry’s evolution, especially in Texas. When the ban on the use of cutback asphalts took effect, in response to the 1990s amendments to the Clean Air Act in Texas nonattainment areas, they took the lead in developing and producing solventless alternatives to cutback asphalts. This enabled DOTs, DPWs, municipalities and other road owners to continue addressing their pavement maintenance, repair and preservation requirements during the nonattainment periods, using environmentally friendly alternatives such as asphalt emulsions.
In addition, they were in the forefront of developing alternatives to the HMA traditionally applied during Texas summers. The formulation of unique recycling emulsions and techniques enables contractors to remove a portion of the existing pavement, remediate it and reapply, using cold-mix technology. The procedure is safer for workers, reuses valuable resources and reduces emissions while providing a road surface equal to or better than alternatives. It also saves road owners and taxpayers substantial amounts of money.
All in one
As a user of asphalt products and derivatives in the paving arena, Texas contractors, specifiers and end users now have the availability of specifically sourced and blended asphalt compounds and products from a single, vertically integrated supplier and applications leader. Furthermore, this supplier has its own tankage, distribution transportation and delivery arms, backed and supported by technical expertise in an AASHTO-certified laboratory. Products can be transported by truck, rail, barge or ship.
Through this purpose-driven combination, the Texas asphalt market now has access to a full slate of asphalt products for applications ranging from traditional hot mix to innovative preventive maintenance treatments, in-place recycling, full-depth reclamation and corrective maintenance for both asphalt and concrete pavements.
With this completely integrated “source-to-sales” model, Texas contractors and end users can now access assured availability, quality, price and delivery of the asphalt products and derivatives they need, when they need it and at the negotiated price. This unique blend of source material with storage, transportation, compounding, product delivery, technical expertise and support from one supplier gives the Texas market a new choice for their “Everything Asphalt” needs and requirements.
