How to Become Your Own Hot-Mix Supplier
BY Contributing Authors from the ADM Sales and Management Team
Editor’s Note: For 2024, AsphaltPro Magazine allows experts in the industry to share how to expand your operations to the next phase of business. Are you ready to take the plunge and start making your own mix? Let’s turn to some professionals who have equipment, services, software and tenure to help you expand to mix design, production, hauling and more. This month’s installment from Asphalt Drum Mixers (ADM) takes an overarching look at the whole plant purchase; upcoming installments drill down into the points raised herein.
At some point in the life cycle of any successful asphalt paving business the question of whether a company should purchase an asphalt plant to begin supplying its own hot-mix asphalt (HMA) is likely to come up. There are clearly many benefits for asphalt paving businesses to add mix production to the company’s list of services. From savings in labor, material and truck expense, to the ability to lay more asphalt and complete more projects, to increased return on investment (ROI), the purchase of a paving company’s own asphalt plant can be an all-around positive experience for any paving business.
There are numerous considerations, however, for helping determine whether paving companies will benefit from the purchase of their own asphalt plant. This article outlines some of the reasons purchasing an asphalt plant might be right for paving companies’ businesses, the key considerations to help in making the decision, and one asphalt paving company’s journey to becoming its own HMA supplier.
French Broad Paving is a medium-sized asphalt pavement company located in Madison County, North Carolina. The company is family owned and operated by Donnie and Regina Reed and T.J. Reed and has been in the paving business for the past 26 years. The parents-and-son team recently made the decision to purchase their own HMA plant. Regina Reed was instrumental in the company’s decision to purchase the plant and put her heart and soul into the project to help it come to fruition.
Since the 2022 season, French Broad Paving has been producing asphalt for its own paving company’s use, as well as selling asphalt to outside paving companies under the name of Madison Asphalt. French Broad Paving runs the gamut in types of paving jobs including federal and state contracts, department of transportation (DOT) projects, city projects, infrastructure projects, and private projects including residential and commercial.
There are many reasons for buying your own asphalt plant and for deciding on the particular manufacturer and plant model to purchase. T.J. Reed is the president, French Broad Paving and its asphalt production company, Madison Asphalt. According to T.J., the main reason for deciding to purchase their company’s own plant was availability. They also liked the idea of controlling their own mix.
T.J. explained, “Having your own plant adds a lot of benefits to your company especially when you own your own pavement company. Having your own plant, you control the mix that you want, when you want it, the type of mix you want, the material that goes into your mix, how you want your mix done. If you want virgin mix, you can fire it up and make virgin mix. If you’re doing infrastructure city jobs, you can add RAP (reclaimed asphalt pavement) percentages to your mix to save money on your mix.”
French Broad Paving purchased their specific plant, the ADM EX 7636 counterflow drum plant, because they felt it offered the best technology and was the most efficient for their county of operation due to the county’s many regulations.
When it came to choosing a particular asphalt plant manufacturer, T.J. said, “One of the reasons that we chose ADM was that it was a turnkey project for us… We wanted somebody that could handle everything from the silos to the cold feed bins, to the storage tanks, to the RAP, and grizzly, to the control house, the control panels, the wiring, the scales, everything comes as a total package. It was really easy because we just had to contact one person or a couple of people, and all our questions were answered.”
According to ADM, the manufacturer, determining if a paving business would benefit from owning an asphalt plant may seem overwhelming. Breaking the task into smaller chunks by evaluating each of several factors, one at a time, can make the task much more manageable and lead to an informed decision. Many considerations come into play to help in deciding whether the purchase of an asphalt plant is right for a particular asphalt paving business. Some considerations include:
- Market size
- Asphalt plant location
- Initial investment and start-up costs
- Asphalt plant features
- ROI expectations
ADM recommends that paving contractors put themselves to task to uncover the following to see if owning their own asphalt plants may be lucrative to the bottom line.
- Determine your business’ total annual asphalt usage and the attendant cost to your business.
- Consider how many additional jobs your business could accommodate annually without the wait time buying asphalt from outside sources.
- Assess the potential for asphalt sales to competitive paving companies (and not just making HMA for your own contracts).
- Check the availability of aggregates in your area, ensuring that there are nearby aggregate sources available to fulfill your production needs through peak paving months.
- Determine if there are large asphalt producers already in your marketing area who may consume the bulk of available aggregates supplies, thus impairing your ability to obtain adequate aggregate to manufacture your own asphalt.
- Determine the number and size of paving companies that already work in the area.
- Determine the number of contracts that are awarded in your locale each year.
According to T.J., consideration of several of the above market-size factors helped lead French Broad Paving to its asphalt plant purchase decision. T.J. and his team were able to determine that there was enough raw material available in their area to be able to make their own asphalt and fulfill their asphalt production needs during peak months.
T.J. said, “We also knew we could sell more paving jobs since mix availability wouldn’t be a problem. We would no longer be at the mercy of the local asphalt suppliers who were bidding the same jobs against us, and with whom it was hard to compete, and to get asphalt to suit our needs, instead of getting just whatever the supplier had that day to sell.”
“Beyond that,” T.J. explained, “We could also do more paving jobs because we could abide by our own asphalt production timelines, getting our asphalt when we needed it for night jobs, and not being cut off by having to pick it up on outside suppliers’ hours.”
T.J. and his team also knew there was a market to sell to other pavers. He said, “Our market area has a lot of mom-and-pop paving businesses in the same position as we were, having trouble getting asphalt from the local suppliers when they needed it. Madison Asphalt sells about 25% of the asphalt we make to other pavers, and provide them a more cost-effective solution for their asphalt.”
Asphalt Plant Location
Where your company’s plant will be located is another key consideration and one that should be determined very early on in the process. Location is a broad term, pertaining to several factors, from how your locale impacts permitting, to transport of an asphalt plant, to the appropriate plant type you buy. Consider these factors relative to location.
Permitting rules and fees vary greatly from one locality to another and are different state by state, as well. Where one state may list exact permit fees for various activities, another will calculate fees based on asphalt production quantity, diesel generator kilowatt hours, and gallons of diesel fuel burned. Acquiring a permit can take six to 12 months, so it’s important to plan ahead and start the process early.
Local environmental regulations may affect a company’s ability to obtain a permit, depending on the specific plant design for which the business is applying. Modern HMA plants burn much cleaner than older ones, but it’s always best to check with a company’s locality for which plant designs could pose permitting concerns.
Transport restrictions may apply to the selected area. As a new producer, it’s important to establish trucking provisions to transport material from the plant to the job site if that hasn’t already been established.
The type of plant a company purchases will also impact the location of the plant. Plants may be portable or relocatable. Portable plants are the best choice in areas where jobs are a considerable distance apart, a market has minimal growth and small population density, and where workloads shift from one area to another due to seasonal factors.
Typically, it is easier to get a permit for a portable plant location than for a relocatable unit. Portable permits may be granted for one main location, and then, depending upon the state, subsequent temporary permits for operating locations will be easier to obtain or may not even be required.
French Broad Paving decided to purchase a relocatable plant. T.J. said, “It can be relocated, it can be moved, but it sits on footers at the moment, and we chose that for numerous reasons. One reason was the size of our lot. We’re inside of a rock quarry, so our lot is only so big. ADM helped us with the size, helped us with locating where our bins go, where our material goes, where everything is, helped us maximize the size available to us, which was a great help.”
Regarding the acquisition of a permit, T.J. said, “Getting a permit was the hardest part of installing our own asphalt plant. It was a long, hard road, but once we got operating, the cost was well worth it. No more sleepless nights wondering if we’d be able to get the hot mix we needed to fulfill our contracts.”
Initial Investment and Start-up Costs
Purchasing an asphalt plant is a serious investment for any company, large or small. Consideration should be given to the size of the plant to purchase. A first-time buyer will often make the mistake of letting the price of the plant dictate the decision and end up purchasing a plant that isn’t the ideal size. Once a company has control of its own asphalt supply, it will be able to sell mix and lay down considerably more material. If the company purchases a plant that is too small, they may not be able to effectively support the demand.
Purchasing a bigger plant won’t necessarily be the right decision either. A plant with a capacity that greatly exceeds demand is wasteful and unprofitable. While price is certainly a large factor in choosing a plant, focusing on what type of plant makes the most sense for the current market situation and future potential is the best approach.
Beyond plant cost, it is also important to look at how much the total start-up investment will be. The first start-up consideration is the cost of plant installation. T.J. Reed sheds light on the many factors that go into installing a plant. “When it came to installation, we got lots of prices through plumbers, electricians, all kinds of people from different aspects that would have to be involved with bringing up the plant from the ground up.”
J. continued, “This being our first plant, we didn’t really realize what we were getting into. I knew there would be some environmental, I knew there would be some zoning issues. I knew there would be people who weren’t happy that the plant was going (in). We were up in a rural area, and it takes a lot of different aspects when your plant first goes up, whether it’s air modeling, whether it’s stack testing.”
T.J. added, “We weren’t prepared for those things. You have to have special companies that are prepared for those things. The sales team at ADM guided us in what to look for in finding companies for our needs and helped us pick cost-effective companies that were worth our time and budget, because cheaper is not always better and vice versa.”
According to ADM, once installation is priced and meets budgetary constraints, consideration must then be given to the coordination and scheduling of plant installation to make the process go as smoothly and cost efficiently as possible.
T.J. illustrated, “ADM designed our plant layout. When we poured the footers, everything was laid out exactly how it needed to be. When the deliveries or the trucks came, they came in certain orders, so we had to start in certain positions to make sure everything lined up and fit exactly right. ADM was just a great help all the way through. From the plumbing, they had diagrams, electrical, they had diagrams, everything that had to be done, they were there on the spot to help us.”
Start-up investment extends beyond physical costs, to an investment in company-management’s time. T.J. explained, “When we began building out our own plant, it was quite an undertaking… We’d never done it before, so it came at us from lots of different angles. It involved permitting, environmental, it involved dealing with the public, it involved all kinds of different aspects that we’d just never done before, weren’t prepared for, so ADM was a huge help.”
T.J. said, “When I called ADM and I told them about the permitting process, and how I needed professionals that are in the industry to come down and speak with the boards, agencies, and the people that we had to go in front of, they sent down representatives, they sat through hearings, they went to board meetings, they went to commissioner’s meetings… They went out of their way for us, which really earned our respect and our business.”
Start-up investment also includes such costs as labor and mix components cost. This will help paving companies calculate how much they will need to charge per ton to turn a profit (if selling to competitive paving businesses), and how much they will save on their own material costs, using asphalt they produce instead of purchasing it from an outside source.
Asphalt Plant Features
A variety of asphalt plant features can greatly impact a paving company’s bottom line, so it’s important as paving businesses research plant models to know the characteristics that can help guarantee a better ROI.
ADM suggests considering the following to help in selecting asphalt plant features that will benefit a particular asphalt paving company’s business the most.
- Modern plants burn much cleaner, and newer components provide superior emissions control and dust handling, than plants of the past.
- Plants with counterflow technology, like the ADM EX Series, will maximize fuel efficiency while minimizing hydrocarbon pollution. Clean-burning plants will also extend the life of the baghouse, and the efficiency of counterflow technology will result in increased production.
- A plant with an isolated mixing zone, such as the ADM MileMaker Series, will allow more mix flexibility, a benefit that will pay off in the long run. By using this type of plant, additives and RAP can be introduced into the drum mixer while remaining isolated from the drying and combustion zones.
- Easy calibration lowers the risk of drifting out of spec, which in turn gives producers confidence in the product they are producing while helping to guarantee customer satisfaction. Easy calibration is especially important when producing mix for Superpave jobs.
ADM also suggests, as companies compare plant prices and determine what is included with each model, to consider the plant’s operating costs and production capacities. A plant may cost less initially, but if it isn’t fuel-efficient or doesn’t produce enough tons per hour for efficient operation, it will cost more over the course of its lifetime. In the case of Madison Asphalt, T.J. said, “We don’t really have accessibility to natural gas, so we chose a plant that was fuel efficient for the fuel that we use in the plant and for our product.”
According to ADM, an initial consultation at the onset of considering an asphalt plant purchase is helpful to the process of determining the features a company will need in a potential purchase. When French Broad Paving first decided to take on the project of purchasing and installing their own asphalt plant, they called a lot of different manufacturers.
Relative to the consultation process, T.J. said, “ADM was really quick to answer our phone calls, answer our questions, and even flew someone out to sit and talk to us about what we wanted to do, how we wanted to do it, and what they said that we needed in a plant. Whether it came from bin size to a tons per hour rating on a plant, the whole size of the plant.”
As companies compare plants and prices, it is also helpful to visit asphalt plant facilities to see these kinds of plants/features in operation. T.J. said, “ADM went so far as to help set up a trip for us to look at some other ADM plants that they’d already set up. We really liked those plants. They have been up for years, running good in our area, in our asphalt business. We’ve been in an asphalt paving business for more than 25 years. In those years I’ve been to lots of asphalt plants all over North Carolina, Tennessee, Virginia, South Carolina. I’ve seen lots of asphalt plants. I was impressed with the product. I was impressed with how clean it still was, how it was well taken care of, well-maintained. I was just impressed with the whole deal.”
Beyond plant features, another key consideration in choosing a plant manufacturer, is the manufacturer’s service after the sale. T.J. said, “I had high expectations when we built this plant. ADM went far and beyond, but one thing that you’re never prepared for is breakdowns, parts. Whether you’re buying a brand new RV or you’re buying a brand new house, there’s always going to be something that’s not right when it’s up and finalized.”
T.J. continued, “Throughout the process, after running so much mix and so many hours of work and laying down thousands of tons of asphalt and putting it out, there’s things that are going to go wrong, from maintenance to parts. We’ve had problems and we’ve called ADM. They’ve had parts overnight, RedBox shipped to us, all kinds of things right there. As soon as I have a problem, they’re a phone call away with parts availability to ship to us. They have large technical support, large customer service.”
While some paving companies will produce enough asphalt to cover their plant and start-up costs within a year, it may take other producers several years. According to ADM, most contractors who are able to consistently produce around 50,000 tons per year, or even less for some, will find that the benefits will quickly outweigh the costs. A number of money-saving factors contribute to a relatively fast ROI.
Paving companies that get their hot mix from an outside source understand labor costs, traveling to get the mix, waiting in long and time-consuming lines for the asphalt to be loaded (especially during peak season), the time delivering the asphalt to the job site, the crew’s time waiting for delivery, and the expense of operating trucks.
ADM said, other cost-savings in supplying your own asphalt includes:
- Contractors’ ability to lay more asphalt and complete more projects, faster.
- Less transport time contributing to increased efficiency. Rather than having to commute to a competitor’s plant, a contractor with a portable plant can place it where it’s most convenient for their operation.
- Shorter hauls also mean fewer trucks to get a sufficient amount of asphalt to crews.
The combination of these factors usually results in at least a 50% better truck utilization for a paving contractor who enters the production market. T.J. said, “We have saved a lot on haul costs by having our own plant. We have also saved a lot of man hours, having to previously wait in line behind 20 trucks to get asphalt from a supplier, and the man hours for workers waiting on the site for the mix. Then, there’s the fact that our day is no longer cut short. We can get more projects done in a day.”
Also, according to ADM, a paving company that moves into its own asphalt production will have greater efficiency through control of their own asphalt supply and material cost. Add in the fact that the company is now producing a product to sell (if it so chooses), the ROI typically will occur quickly. Every plant will be different, but the majority of new asphalt plants will realize a return in just a few years.
T.J. said, “Selling asphalt to other paving companies in the area through Madison Asphalt, our asphalt production company side of the business, has not only added to our businesses’ revenues because we are able to supply them cheaper than competitive asphalt suppliers and improve our ROI overall, but I have pride in the projects other pavers are doing with our asphalt.”
According to T.J., the purchase of their asphalt plant met their expectations. Madison Asphalt’s ROI in just the second season of producing mix enabled them to build a lab, which in turn enabled French Broad Paving’s ability to start winning state projects. T.J. said, “We were recently awarded our first state job for 16,000 tons of asphalt, all because we now have full control of our mix, and that’s really the only way you can meet the state’s spec requirements and be a player.”
In summary, the benefits to paving companies owning and operating their own asphalt plants are measurable, and clearly show how much productivity can increase and costs can decrease for an improved bottom line.
For those paving companies that have made the decision to purchase an asphalt plant and aren’t sure what asphalt plant is right for their operation, look to a manufacturer that offers fast response, expert advice and customized solutions to help improve ROI.
In addition to ADM, French Broad Paving received quotes from two other manufacturers. At the end of the day, according to T.J., they felt ADM had the best price for the money, the best technology, the best plant to fit their needs, and the best customer service.
He stated, “People answered the phone right when we called. Somebody was always available, no matter what questions I had. If somebody wasn’t available or away from the phone when we called, they were prompt to call us right back and quick to respond to us.”