Bitumen price rise affects roadworks

Dunedin City Council staff are watching soaring world bitumen prices, fearing they could lead to "significant problems" with snowballing road maintenance costs as soon as next year.

The warning comes as the council's infrastructure services committee this week voted to defer two more road reconstruction projects planned for Wingatui and Silverstream Valley Rds, in Dunedin, to free up funds within existing budgets for more essential work.

Deferring the two projects would allow $880,000 to be transferred from the council's road reconstruction budget to the resealing budget, where it would be used to maintain roads not yet nearing the end of their lives.

Contacted by the Otago Daily Times yesterday, DCC transportation operations projects engineer Evan Matheson said given budgetary pressures it was more cost-effective to reseal roads than reconstruct those already failing.

Staff were not seeking additional funding for roading at this stage, but if bitumen prices continued to soar next year, the council could be forced to rethink budgets, he said.

"Next year . . . if the world economy is still in turmoil and prices spike again, then we have got significant problems," he said.

The decision to defer the two projects comes after staff last month decided to delay the latest stage of a $12.5 million project to fix six "safety hotspots" on Otago Peninsula roads because of a $1.8 million shortfall, also blamed on bitumen prices.

Bitumen prices have jumped from $400 a tonne last year to peak at $1100 earlier this year, before declining about 5% over the past two months.

The dramatic 12-month rise had led to 25% increases in tenders received by the council for various roading projects - despite some allowance for price increases in council budgets, Mr Matheson said.

Contractors spoken to said they were hurting too, with work drying up as cost increases began to bite.

Roading New Zealand chief executive Chris Olsen, representing roading contractors, warned councils deferring work they could face a "snowball of maintenance problems" down the line.

Mr Matheson agreed yesterday, but said bitumen prices were difficult to predict - they were not dropping as oil prices did, and construction prices had remained high even with bitumen's slight decline in the past two months.

"We can handle a short-term spike in construction prices. We can delay work we do, but if we have to delay work for two years in a row, then we are at risk of falling behind in our maintenance work and roading upgrading work.

"Then the public would start to notice the conditions of the roads were getting worse," he said.

chris.morris@odt.co.nz