A couple posts down, we posted a NYT story about traffic paint shortage.  

We just received an e-mail from ATSSA, our trade organization.  The following is their response to the shortage.  We apologize for the length.  We copied their e-mail; they did not provide a link.  Regardless, the problem is important enough to post the comments in their entirety:    

ATSSA CHAIRMAN URGES STATES TO ELIMINATE LIQUIDATED DAMAGE CLAUSES AS A RESULT OF GLOBAL SHORTAGES OF RAW MATERIALS USED TO PRODUCE ROADWAY STRIPING PRODUCTS

Fredericksburg, Va. -

Joseph Jeffrey, the Chairman of the American Traffic Safety Services Association (ATSSA), today urged state departments of transportation and other project owners to suspend penalties and/or liquidated damages for roadway striping contractors who are unable to deliver products in accordance with established project schedules. The request is the result of a global shortage of raw materials used to produce roadway striping products. Jeffrey’s letter said in part, “Due to raw materials shortages, striping products are simply becoming unavailable.”

Global shortages of several key raw materials used to produce paint, thermoplastic and epoxy have resulted in unprecedented delays and increased costs in the production of these products. Other factors contributing to the shortages and price hikes include shut-downs or repairs at production facilities and increased global demand for the materials.

“The cost of resin from domestic suppliers is up 20 percent from 2009, and off-shore resin producers have increased their prices by 80 percent in that same timeframe,” said Jon Sproul, general manager of Swarco, Columbia, Tenn. Based on recent reductions in the availability of acrylic resin, rosin esters, liquid epoxy resin and titanium dioxide (TiO2), the manufacturers of roadway striping products are operating far below past production levels.

“The paint shortage is hitting the roadway safety industry hard,” said Tom McSwain, eastern United States sales manager and director of government affairs, Ennis Traffic Safety Solutions, Dallas, Texas. “We are operating at significant reductions right now over where we were last year. This situation is adversely affecting all of us.”

Not only are the shortages increasing the price of goods, they could also result in penalties and/or liquidated damages for ATSSA members and other contractors who cannot complete projects on time.

“The continued shortages could result in penalties for ATSSA members and contractors who are unable to fulfill their contractual obligations due to paint, thermoplastic and epoxy not being available or delivery of the product being delayed significantly,” added McSwain.

“Now is the time for ATSSA members to become proactive in their chapters, speaking with one voice to their local DOT leadership, urging them to eliminate costly liquidated damage clauses on those projects affected by these shortages. In addition, they should solicit extensions on those projects from DOT management,” said ATSSA President and CEO Roger Wentz.

The following raw materials are affected:

Acrylic Resin: This raw material is the backbone for all waterborne traffic paint. Suppliers of acrylic resins for roadway paint have instituted price indexes to manage the month to month volatility. Propylene, a key component, has climbed over 80 percent in the last six months. Suppliers have had significant outages in the production due to unforeseen shortfalls. Force majeure has been declared by a major producer in the acrylic resin industry.

Rosin Esters: This is the primary resin system used in “alkyd-based” thermoplastic. China has traditionally been a significant exporter of rosin ester into the U.S. This year, Asian demand and a poor rosin crop in Asia have driven rosin pricing to historic highs. U.S. rosin manufacturers are extremely tight in supply due to a shift in the adhesives market from petroleum based chemistry to rosin-based. There has also been some domestic rosin production that has been taken off-line due to a lack of return on investment in the past. The trouble the roadway safety industry faces is that rosin ester prices for road markings are the lowest price of all industries to which this material is supplied. Larger industries, such as the adhesive industry, pay a much higher price for rosin ester, therefore, as demands increase and supplies tighten, thermoplastic manufacturers, who pay the lower price, are the hardest hit.

Liquid Epoxy Resin: There have been severe shortages in the chemicals used for epoxy resin production. This has caused sales allocation across all epoxy industries and price increases in the neighborhood of 30-plus percent.

Titanium Dioxide (TiO2): This is the white pigment used in all white roadway paint, thermoplastic, epoxy and a multitude of other chemistries. The TiO2 industry has struggled through financial and production issues for years and it is comprised of a very limited number of manufacturers. As the economic recession hit, TiO2 productive capacity was taken out of the system. The Asian market is now demanding significant quantities of the product and substantial volumes of TiO2 are being exported by U.S. manufacturers to Asia. Growth demand in 2010 for TiO2 has been in the range of five percent domestically, but the increased demand in Asia, coupled with the lowered capacity of market, has caused significant shortfalls in supply. Like rosin esters, TiO2 prices paid for road markings are near the bottom price paid of all industries to which this material is supplied.

Larger industries, such as the automobile industry, pay a much higher price for TiO2, therefore, as demands increase and supplies tighten, those who pay the lower price, in this case the roadway safety industry, are the hardest hit.Industry experts advise that this issue is difficult to predict, as is the future availability of these materials due to numerous, complicated factors.

“It is our hope that state departments of transportation and other project owners will understand that individual contractors are at the mercy of volatile international markets in this case and will respond by providing much needed relief to them,” added Wentz.