"THE SYNTHETIC"
Asphalt Financial Hedge for Liquid Asphalt
Asphalt Unlimited, LLC was established to empower asphalt plant owners and highway contractors by enhancing their efficiency in every aspect of their liquid asphalt needs: pricing, supply, and risk management. We excel in reducing costs, crafting better bids, and ensuring financial peace of mind in all areas related to liquid asphalt. There are approximately 15 variables that go into asphalt pricing. We comprehend those variables to you don't have to. With innovative solutions like the first-ever Asphalt Financial Hedge, the Daily Asphalt Index, and the Asphalt App, we are dedicated to improving your business's profit plan and overall success.
"The Synthetic," an advanced algorithm developed by Brian Lawrence at Asphalt Unlimited, LLC, has been rigorously backtested over the past 17 years using Coker Values (see chart). This algorithm shows an impressive Pearson correlation value of 0.98324 with Coker data. What does this mean? It means we have a deep understanding of asphalt pricing. With such a high correlation to historical data, we can leverage this knowledge to estimate future pricing with greater certainty.
learn moreThe Synthetic: Brian's Story
Around 2010, an energy trader sat in my office and asked me, “Don’t you think we can create a financial hedge for liquid asphalt?” I chuckled and said, “No way!” But the question lingered in my mind. As I began transitioning into retirement, I had time to revisit the idea. I realized that for a hedge to work, it needed two key qualities. First, it had to have a comparable relative value of asphalt to backtest the hedge. Second, the hedge needed to be composed of highly traded financial energy products to ensure liquidity.
It dawned on me that I could use Coker Values as the comparable value because they express the value of asphalt in terms of other products (pet coke, gasoil, naphtha, propane, etc.). These products met the criteria of having value but were not highly traded in the financial markets. Putting on my engineering hat, I performed mass balance equations and studied relative BTU values, ultimately creating an equation that uses energy products in specific combinations and proportions to produce an asphalt value. I call this “The Synthetic.”
I back-tested The Synthetic against 17 years of published Coker alternative asphalt values and conducted a Pearson correlation analysis. The result was 0.98324, indicating a near-perfect positive correlation. The Synthetic’s calculated values were consistently above the Coker Values (see graph), never predicting a value below the published data. This consistency gives me confidence in its ability to predict future prices and produce reliable financial outcomes. I believe that, in the near future, Coker Values will set the floor for wholesale asphalt pricing.
I am offering this innovation to the asphalt industry in two ways. First, through The Asphalt App, available on the Apple App Store and Google Play (snap QR code below). The Asphalt App gives an extimate of future asphalt prices up to 18 months in the futer based on the previous day's energy market closing prices. Users can select the time period and geographic region of interest, and the app presents the a calculated estimate based on the intial Synthetic formula and various variables.
The second offering is an actual asphalt financial hedge. We procure financial energy product futures according to The Synthetic formula. If energy prices rise and the hedge becomes profitable, the financial market offsets losses incurred in the physical asphalt market. This allows you to bid today's cash price plus the cost of the hedge, instead of guessing future prices, without compromising a low bid process. If the market moves in the other direction, the financial loss is capped at the cost of the hedge, meaning the hedge holder pays less than the bid in the physical market.
"MODELS"
Business Models to improve your profit plan.
Limited Partnerships
Your company would like to build a Liquid Asphalt Terminal, but you don’t quite have the volume alone to make the investment pay off. Here’s an idea…team up with some fellow producers in your area through a Limited Partnership. Asphalt Unlimited acts as the Managing General Partner and manages the terminal, buys the asphalt, and provides fixed forward pricing. This is a simple and elegant solution to amass enough volume to justify a terminal.
Cost Capping
Producers are facing tremendous pricing pressure in the asphalt business. Inflationary pressures are exploding. Do you know you can cap your future asphalt costs? When you get a successful fixed-price bid, you have essentially sold an asphalt future to your customer. You sold a contract to provide asphalt in the future at a fixed price, regardless of the market price at that time. Wouldn’t be nice if you had a way to assure that the price you will pay at the time you need it, will not be above your bid price? AU can show you how to manage this risk.
Equity Participation
Asphalt Unlimited can help provide financing to terminal projects in many different ways, but one of these ways is that we actually partner with you by taking a small equity position in the terminal business. Lenders are going to want to see someone involved in the business who can assure supply, knows how to forward price, and maximize profitability.
"SERVICES"
Services: keeping you on the road to success.
Management of Liquid Asphalt Purchasing
Turnkey Management of Liquid Asphalt Purchasing (Wholesale or Retail)
Don’t know where to source asphalt? Do you know we lose sources in the U.S. every year? Do you know if you’re getting a good deal? Should you fill your tanks? If so, when? Make Asphalt Unlimited your Liquid Asphalt Purchasing Agent and we’ll handle all of this for you.
Forward Pricing Consultation/Bidding
Forward Pricing Consultation/Bidding
You have a large project to bid and you are at 100% risk for the liquid asphalt price over multiple years. You can’t bid extremely high without risking your low-bid status. What do you do? Do you just guess? Download our Future Pricing App (link) from the Apple App Store and subscribe to take the guessing out of it. You can also track future pricing trends over time. We can also help you to financially hedge your asphalt risk.
Physical Brokering (Buying/Selling)
Physical Brokering (Buying/Selling)
Do you need supply? AU can provide supply if you need it through our network of contacts in the Liquid Asphalt Industry. Do you need to move asphalt or find a spot for purchased asphalt that you can’t currently take? I can find a home for it. AU can also arrange for rail car rental/management.
Terminal Construction Financing
Terminal Construction Financing
Would you like to build a Liquid Asphalt terminal, but are having trouble obtaining financing? Asphalt Unlimited, LLC can help secure financing for your Asphalt Terminal, tank expansion projects, adding of tanks, and/or Polymer Production Capability. We have a network of investors that are looking for opportunities.
Terminal/Tank Leasing
Terminal/Tank Leasing
Do you have a Liquid Asphalt Terminal that you would like to lease or even sell? We can find you a tenant, lease it ourselves or find you a buyer.
Terminal Economics
Terminal Economics
Asphalt Unlimited has vast experience in calculating construction costs, throughput costs, overhead costs, labor, energy, railroad, dock and other costs associated with constructing and operating a Liquid Asphalt Terminal. We have expertise in economizing layouts and sizing terminals appropriately. The earlier you get us involved in the process, the more money you will save.
Feasibility Studies
Feasibility Studies
We can help you determine whether or not a Liquid Asphalt Terminal makes sense for your business model and market. There are many factors that go into this decision such as: supply, location of supply, freight rates, competition, market health, and potential site locations. All of these factors and more are important to determine before making a decision to build.
"THE ASPHALT APP"
The Asphalt App provides the Daily Asphalt Index, offering insights into asphalt price trends derived from The Synthetic. Additionally, it features the Futures Estimator, empowering users to forecast pricing trends up to 18 months ahead by quarter and geography.
The Futures Estimator leverages the latest market closing prices and incorporates a sophisticated set of variables and calculations. These parameters are meticulously curated by Brian, drawing from his extensive thirty-plus years of asphalt industry expertise.
learn more
Contractors and asphalt producers have to live in a low bid environment. How do you bid your liquid asphalt when energy and crude prices both rise and fall sometimes $300/ton over just a few months? The market is volatile, and you need reliable information to make an informed decision. We are able to provide that information through our Asphalt App.
The Asphalt App pulls the daily closing prices of a variety of energy products from the NYMEX and combines them using The Synthetic to determine our Daily Asphalt Index. The Asphalt App also graphs those Asphalt Daily Index values for trends over time. The daily value is then adjusted for time and geography to give a range of retail (truck rack) prices for up to 18 months into the future.
Using the Asphalt App is simple. The Daily Asphalt Index refreshes daily on the app’s home page. For future pricing, simply use the slider to select the time period (ranges are given in quarters and go out 18 months) and then select the geographic region of the U.S. where you’re looking for projected liquid asphalt pricing. that you’re interested in knowing the projected liquid asphalt pricing for PG 64-22. This provides information in real-time based on current market reality for future pricing. Make checking the Asphalt App part of your daily routine!
return