The Asphalt Challenge

What’s happening in the asphalt marketplace: A look-back over the last 30 years.
What is still changing and where do we go from here?

The asphalt industry has experienced many complex challenges over the last 30 years and the continued success of individual companies in this market space has been strongly dependent on their efficient operations and their utilizing of new technologies & new products to solve the challenges they faced.

The advent of cokers changed the asphalt marketplace.

In the 1990’s, global crude oil began trending towards heavy sour (sulfur-bearing) crude with the resulting asphalt production increasingly being fed to cokers to maximize the recovered value of the heavy crude. The sales value and availability of asphalt now had to compete with coker value.

Development of the Canadian Oil Sands and subsequent recovery of the sand-bound bitumen generated a new heavy crude but the recovered oil was too viscous to transport without dilution. Upgraders were required to produce a “synthetic crude oil” that could be efficiently transported by rail or pipeline but the resulting characteristics of this synthetic crude oil and particularly of the contained bitumen are very different than that of conventional crude oil.

Refiners in the Midwest and Rocky Mountain regions began to experience a significant decline in m-Value; a key quality measure of their asphalt product, which in many cases, was tied to their processing an increasing amount of this synthetic crude oil. That trend continues to expand today as more synthetic crude is processed by an increasing number of refiners across the country. Coker value was not impacted.

The PDVSA strike and resulting loss of a better-quality asphalt supply in 2002-2003, challenged the end-user industry to quickly learn how to qualify and use alternative asphalts and extenders. When PDVSA asphalt returned to the marketplace, their asphalt product quality had changed and the asphalt marketplace had also changed.

Shale Oil created another asphalt market shift.

During the shale boom from 2008-2014, the increasing availability of low-cost shale oil from fracking fields like the Bakken and Eagle Ford, enticed refiners to process less heavy crude. As shale oil carries little asphalt, the result was less available asphalt and the asphalt quality again had changed.

Following the OPEC price reduction in late 2014, continued investment in the shale fields became uneconomical and suddenly the refining community shifted back to processing large quantities of imported heavy crude. Unfortunately, the ensuing quality variations of the generated asphalt were much greater than prior experience, leaving a new and more complex challenge to the end user; how to formulate to frequently-changing base binder characteristics.

In late 2016, OPEC agreed to reduce crude oil production to stabilize global pricing and North American shale oil gradually returned to become the world’s marginal crude supply, providing crude oil price stability but again threatening North American asphalt quality and supply. Integrated import traders took advantage of price arbitrage in 2016-2019, bringing new supplies of asphalt to the U.S. East Coast and further magnifying the quality deficiencies of the local asphalt this industry so heavily relies on.

The COVID pandemic wave in 2020 brought a whole new set of challenges to the global refining community and to all of the market segments dependent on this industry. Fuel demand plummeted and refinery rates were reduced or refineries entirely shut down.

As we entered 2021, fuel demand was slowly recovering but the refining community still sought the right balance of crude oil selection and total refined product economics, further stressing the related quality issues in products such as asphalt. The asphalt end-user needs to be prepared for more challenges ahead.

Green chemistry challenges the asphalt space.

Further compounding the challenges of managing changing asphalt quality; the expanding use of asphalt additives, extenders and diluents greatly magnified the complexity and risks of developing and maintaining a cost-effective and successful formulation for a paving or roofing application.

A huge wave of “green chemistry” rejuvenators and extenders; based on various natural oils, entered the asphalt marketplace over the last 15 years as stories of unexplained early road failures shocked the state and federal highway agencies and threatened to isolate and potentially ban many of these useful modifier chemistries.

Issues of over-use or miss-use of some of these new green additive chemistries has frequently shocked the marketplace and generated caution and skepticism of many promising and beneficial chemistries. Today, the asphalt user seeking help with chemical additives is challenged to choose between vendor promises of functionality and market rumors of early road failures, which actually may be more attributed to the lack of discipline in the use of one or more of these many additive chemistries.

Crude oil selection and mixtures of multiple crude oils to be refined are often determined by computer-driven value & cost modeling and are intended to generate the highest profit return for that refiner. These refining decisions, driven by the need to generate higher value products to recover their investments, typically do not reflect or even consider the roofing manufacturers or paving contractors’ requirements for consistent quality asphalt.

A typical refiner today, especially those with ready coker access, will have little interest in choosing a specific crude slate in order to generate a better-quality asphalt for roofing or paving applications.

It is highly unlikely that today’s refining community will alter its path.

In little more than two decades, North America has experienced (i) significant shifts in the availability of asphalt, (ii) higher costs for the available asphalt but more importantly, (iii) dramatic and continuing changes in asphalt quality & consistency; all of which, threaten the paving contractor’s and roofing manufacturer’s long-term ability to provide a high-quality product and significantly increases the costs of roofing our homes or paving our highways.

Ultimately, this variable asphalt quality also impacts the life cycle of those roofs and highways.

Highway paving in the U.S. uses 18-22 million tons of asphalt each year and ~60% of that asphalt is modified with SBS, EVA, APP, GTR or other compounds to add specific functionalities. The North American roofing industry uses 4-5 million tons of asphalt each year and approximately 20% of roofing asphalt is modified with SBS, APP or other polymers.

These traditional polymer modifiers provide elongation, elastic recovery, wear resistance and enhanced thermoplastic characteristics at a wide range of temperature and environmental conditions, allowing the asphalt compounds to yield longer life highways and more resilient roofs on many commercial buildings, schools and hospitals.

As asphalt quality continues to decline, polymer affinity and the resulting compound effectiveness will also continue to change, in many cases, requiring additional polymer in an attempt to compensate or by using more chemical modification to help offset or delay the quality impact on the finished applications.

Beginning ~10 years ago, more and more of the states’ highway departments have been forced to use significantly higher amounts of SBS to try and overcome the increase in road failures due to the variable quality of the base asphalt.

Many of the shingle manufacturers today are forced to add some small amount of polymers to their standard shingle mix to help offset the declining or unpredictable quality of asphalt they receive. Similar issues also extend beyond roofing or paving applications and include adhesive, sealant and coating formulations.

These rapidly changing circumstances have already become a major challenge to both the roofing and paving industries and unless something changes; will continue to present an increasing need for better modifiers or chemical additives to predictably (a) improve or protect weathering characteristics for shingle manufacturers, (b) improve polymer affinity in the case of SBS, APP or other polymer modified products for paving and roofing applications, (c) improve processing characteristics of filled asphalt compounds, (d) allow use of lower cost and more readily available asphalt feedstock, all without compromise of pavement performance or roofing manufacturer's warranty requirements.

Asphalt quality changes and supply challenges will continue unless we change the path.

Our Solutions

Engineered Additives, our sister company; Asphalt & Sourcing Alliance, our Technology Partners, our Alliance Partners and our Technical Sales Associates, have all provided practical and hands-on knowledge and experience to asphalt utilization for paving and roofing applications for decades.

Many of our team have actively participated in the various asphalt industry organizations to assess, communicate and drive the future needs we foresaw through group presentations and industry assessments. We are recognized and trusted by our customers and industry colleagues, as being truly focused on offering true value through our products and our guidance.

We believe a major shift is needed. Can you help?

The products we have provided have been proven and established in the North American and Global marketplace as effective and economical means to offset the earlier declines in the performance of asphalt products but based on the continuing decline in asphalt quality, that’s not good enough.

We understand the financial and technical aspects of the continuing changes with crude oil selection and the resulting impacts on asphalt quality and consistency over the last 30 years, and we will continue to work diligently to seek unique and new paths to provide solutions. We have built our entire business path around asphalt quality assessment and new product development. We are now looking at the next chapter in our journey. Come join us and lead or contribute in our quest.

Phone: (973) 216-3560 • Fax: (970) 251-7254

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320 Commons Drive, Suite 313, Parkesburg, PA 19365
Offices in: Pennsylvania, Florida | EA

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