The American Reinvestment and Recovery Act of 2009, colloquially known as the stimulus plan, earmarked roughly $27.5 billion for highway and bridge construction projects. After scrambling for their shares of the transportation funding, state and local governments now have plenty of cash sitting around, and are waiting to dole it out to construction crews around the nation. However, many contractors (and state departments of transportation) are unable to finish jobs on time (or at all), because they are having a tough time getting their hands on enough of the yellow and white traffic-striping paint needed to delineate the lanes of roads and highways. The crux of the problem is two chemicals with long names that are in short supply.
Methyl Methacrylate (MMA) is a thick, sticky, resin-like material that is a key ingredient in roadworthy paint, which is manufactured to last a long time and is expected to handle the wear and tear that results from heavy traffic volume and inclement weather. MMA is what helps make roadworthy paint more durable. The other additive is titanium dioxide (TiO2). This product, which is used in a wide variety of goods ranging from sunblock to food coloring, helps give roadworthy paint its brightness and high reflectivity.
Dow Construction Chemicals, a branch of The Dow Chemical Company (DOW), usually supplies more than half of the nation’s MMA. However, the Texas-based plant that produces most of this product had to be shut down earlier this year for retooling. (This facility has already been brought back on line, and is currently running at full capacity.) Lucite, a wholly owned subsidiary of Mitsubishi Rayon, spent five weeks overhauling a Tennessee-based facility, which left it with insufficient MMA inventory to meet demand. Finally, other major producers of roadworthy paint or the paint additive scaled back production during the global economic downturn, and have been unable to catch up in recent months. The list includes Germany-based Evonik Industries; France-based Arkema; and Dutch conglomerate AkzoNobel. All told, the world’s major suppliers of MMA were caught unprepared for the massive surge in demand experienced earlier this year.
Until very recently, chemicals companies and paint manufacturers around the nation were able to import an abundance of TiO2 from China at a relatively low cost. However, rising internal demand stemming from that nation’s highway and public works construction boom, led China’s government to discontinue international sales of the additive. While it will take some time for domestic producers of TiO2 to ramp up production rates, this is seemingly not as problematic as the shortfall in MMA supply.
The fallout has not been a pretty picture. As one would expect, the supply and demand scenario has led to sharp increases in highway paint, MMA, and TiO2 prices. Moreover, there is not an alternative type of roadworthy paint that is readily available at present. So, due to lingering safety concerns (see below), when there is not enough paint in the supply chain, construction crews have only been focusing on painting the yellow divider on two-lane roads, while leaving out the white lines that mark lanes heading in the same direction and the shoulders. In many states, construction crews have stopped repainting older, faded stripes, and are opting to put a sealcoating down to protect roads from further wear and tear. Finally, contractors and departments of transportation have been experimenting with reflective buttons and tapes, or simply trying to paint skinnier lines.
Roads and highways with insufficient lane markings or faded stripes pose considerable safety risks. Drivers may unknowingly drift out of their lanes on highways or, worse yet, into oncoming traffic on two-lane rural roadways. The National Highway Safety Traffic Administration (NHSTA) reports that automobile accidents in which a driver strays from his or her lane are far more likely to include serious injuries or fatalities than any other type of collision. Similarly, the American Association of State Highway and Transportation Officials (AASHTO) claims that most fatal automobile accidents occur at night, when it is dark and visibility is poor, because there is a greater chance for drivers to veer out of their lanes. To be fair, many of these accidents involved drivers that reported feeling drowsy or even admitted to falling asleep behind the wheel. These collisions also involved a disproportionate number of relatively new drivers. Still, the news is not good for automobile insurance. Insurers like GEICO (a subsidiary of Berkshire Hathaway (BRK.B)), The Progressive Corp. (PGR), and The Allstate Corp. (ALL) may experience a sharp uptick in claims during this peak driving season.