Factors Driving the Paving Asphalt Market

Paving asphalt gains will be driven by a more favorable funding environment, legislative pressure to improve the nation’s aging infrastructure, and healthy advances in non-building construction activity, particularly in the highway and street segment.

Legislation created a favorable funding environment for highway maintenance. Many states are considering legislation to increase fuel excise taxes, which help fund highway projects. More favorable economic conditions will boost overall tax revenues used to fund paving projects. Many legislative bodies will approve direct funding mechanisms, such as grants or bond issues, to allocate additional capital for such projects as road construction and highway repair and rehabilitation.

Demand for paving asphalt used in highways and streets is forecasted to advance 3.3 percent per annum to 13.7 million tons in 2021, aided by increases in government funding and rising highway and street construction activity. Demand for paving asphalt products in these applications is primarily driven by government funding for highway and street construction, which accounts for 97 percent of non-building paving asphalt demand.

Demand for paving asphalt products in all applications is forecast to advance 3.4 percent per annum to 21.9 million tons in 2021. Factors driving growth include the passage of the Fixing America's Surface Transportation (FAST) Act; efforts by state governments to increase infrastructure budgets and fuel taxes; rising highway, street, and other non-building construction activity; and strong gains in nonresidential improvement and repair activity. The passage of the FAST Act, which allocates $305 billion in funding for highway maintenance and other infrastructure projects, will boost short-term demand for paving products.

Asphalt emulsions are expected to experience the most rapid gains of all paving products due to their cost effectiveness compared to asphalt cutbacks and efforts by manufacturers to reduce asphalt usage. Emulsions are better able to address environmental and worker safety concerns posed by other products such cutback asphalt and hot-mix asphalt cement.

Highway and street applications will continue to account for the majority of demand in the paving asphalt industry and grow at a pace similar to the market average. Gains will be driven by recent highway legislation and rising highway and street construction expenditures.

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