Under the current system, the monthly price for a tonne of asphalt cement is released at the beginning of each month, but reflects only some of the previous month’s increases. The June 1 price of $433.80 per tonne didn’t fully reflect the $60 per tonne increase that occurred in the last week of May.
Correspondent
The Ontario Ministry of Transportation (MTO) has announced that it will change the publication date of its monthly Asphalt Price Index to help reflect changes to asphalt prices in a more timely and accurate manner.
Under the current system, the monthly price for a tonne of asphalt cement is released at the beginning of each month, but reflects only some of the previous month’s increases. The June 1 price of $433.80 per tonne didn’t fully reflect the $60 per tonne increase that occurred in the last week of May.
“Since the monthly figure is based on an average of four weekly averages, the June price only reflected a portion of that $60 May increase,” says Mike O’Connor, Executive Director of the Ontario Hot Mix Producers Association (OHMPA). “The actual June 1 price of asphalt cement was a little higher than $460 per tonne.”
Beginning July 1, MTO will publish asphalt prices at the end of the month. The next price index will be published on July 31, 2006.
“This wasn’t much of an issue when prices were more stable,” says O’Connor. “But MTO has agreed that the past practice of using the average of the previous month’s asphalt cement prices to determine the current month’s index can be improved to accommodate rapidly rising prices.”
O’Connor says the $460 per tonne price of asphalt cement will probably translate into a hot mix asphalt price increase of about $7.50 per tonne. Hot mix asphalt overlays on existing surfaces will experience a 10 to 15 per cent increase in total project costs. More extensive rehabilitation work and new pavement construction where hot mix asphalt represents a smaller portion of the overall work will likely result in a five to eight per cent price increase.
“The industry may or may not experience an additional $40 per tonne in asphalt cement prices during the summer,” says O’Connor. “We’ve been hearing rumours that it could hit next week or in a couple of weeks — no one knows for sure.
“Contractors are very concerned. They’ve never had to worry about these things before. They’re now listening to rumours and possibly starting rumours of their own.”
OHMPA is recommending that contractors include hot mix asphalt price escalation clauses in all quotes.
“Owners should most definitely include price escalation clauses in all related tenders to protect their own interests if future increases are moderate or if the record high asphalt cement prices decline,” says O’Connor. “There really is no down side to pavement owners and specifiers who include escalation clauses.”
O’Connor notes that some smaller paving companies may be forced into bankruptcy attempting to meet prices on quotes they had issued months earlier.
“It’s been encouraging to hear that enlightened owners have found ways to share some of the burden with contractors on firm contracts where escalation clauses were not in effect.”
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