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Homebuilding market on the mend

After a long drought, homebuilding is slowing picking up, which is good news for a lot of plastics businesses including material (WPC and vinyl) producers, as well as machinery makers. Reflecting the overall economy in general, the housing market has had its fits and starts. However, it is expected to move in a slow, gradual upward path in 2012, according to economists participating in an April 25 National Assn. of Home Builders (NAHB) construction forecast webinar on housing and the economic outlook.

“The aggregate information suggests we’re just in a pause mode right now in terms of these measures,” said NAHB Chief Economist David Crowe, who noted this could partly be the result of an early spring that brought much better weather than usual into the picture at the start of this year and pulled some housing activity forward.

Crowe noted that less volatile quarterly data have continued to show “modest improvement” in key housing indicators such as builder sentiment, new-home sales and housing production. “The housing outlook continues to slowly brighten,” he said.

The remodeling market, however, remained flat during the first quarter of 2012, according to the NAHB. The Remodeling Market Index (RMI) compiled by the NAHB, decreased one point to 47 from the upwardly revised 48 in the previous quarter, indicating that more remodelers report market activity is lower (compared to the prior quarter) than report it is higher, with 50 being the median benchmark.

In the first quarter, the RMI component measuring current market conditions dropped one point to 49, while the component measuring future indicators of remodeling business fell two points to 44.

The three components of remodeling measuring current market conditions moved in different directions in Q1: major additions remained even at 44; minor additions rose one point to 52; and maintenance and repair dropped four points to 51. The backlog of remodeling jobs dropped to 43 and appointments for proposals fell five points to 45. Calls for bids on remodeling jobs rose one point to 47 and the amount of work committed for the next three months remained even at 42.

“Even though many remodelers report that consumers are showing increased interest in remodeling, they are hesitant to act because of financing constraints and the spotty nature of the economic recovery, which so far has failed to reach some of the larger markets in the country,” said Crowe. “Many consumers are likely to be deferring large remodeling projects until they feel more comfortable with the economic climate in their area."

Exterior remodeling seems to be strong, and adding or replacing siding remains one of the most popular ways to change the home’s curb appeal. Recent research by the Vinyl Siding Institute shows that homeowners “care most about beauty, durability and especially value and low maintenance,” according VSI President and CEO Jery Y. Huntly.

Both homeowners and remodelers were surveyed by the VSI, and Joe Klink, director of corporate relations at ProVia, a company that produces Heartland Vinyl Siding, agreed. “Consumers continue to have interest in authentic looks with lasting low maintenance,” he told Housing Zone magazine.

Strong growth for siding, WPC forecast
A recent report from The Freedonia Group, a Cleveland-based industry market research firm, revealed that the demand for siding in the U.S. is forecast to advance 8.4% annually through 2016 to 95.5 million square meters, valued at $11.4 billion. Vinyl siding accounted for the largest share of siding demand in 2011, with a 37% share of the market in area terms, and will continue to lead the market in 2016. Insulated vinyl siding and products that better resemble natural materials such as wood and stone will promote demand, said The Freedonia Group.

Wood plastic composite (WPC) materials continue their growth trend, with The Freedonia Group reporting that demand for both wood-plastic composite and plastic lumber is projected to advance more 13% per year to $5.4 billion in 2015, creating a market for 2.6 billion lb of plastic. Growth will be a result of a “rebound in construction expenditures” and increasing consumer demand for building products made from composite and plastic lumber, instead of more traditional materials such as natural wood.”

Decking, which was the leading application for composite and plastic (primarily vinyl) lumber in 2010, will experience the most rapid demand advances through 2015. Popularity of WPC and plastic lumber is due to the low maintenance required and longer lifespan. “Decks made from these materials may cost more initially but offer long-term savings because they do not require annual staining or insect treatments,” said The Freedonia Group’s report.

Molding and trim to grow
Demand in other applications will also pick up steam, including molding/trim and windows and doors, which are expected to post the most rapid demand gains through 2015. Molding and trim demand will be supported by an increase in housing completions, boosting demand for building materials. Homeowners will install windows and doors made from cellular PVC and composite lumber because of their resistance to rotting and resemblance to natural wood. Other applications such as WPC and plastic lumber in landscape, outdoor products and fencing applications will also boost sales. WPC will see greater demand and post more rapid gains than that for plastic lumber through 2015, advancing over 16% annually to $2.5 billion, according to The Freedonia Group.

Machinery makers spot an opportunity
While that’s a nice percentage, Milacron is gearing up for expected growth in the European WPC market of around 20% during 2012. This anticipated expansion will come from a mix of new business and the pushing out of existing imported products from the Far East and the U.S.

“We are seeing more customers coming to us looking for higher output machines after realizing that their existing plant is just ‘not up to the job,’” reported Cincinnati Milacron’s European Business Manager and WPC processing specialist, Steve Jones. “It is now becoming increasingly apparent that running a basic extruder with WPC is just not a viable option for successful and profitable production of WPCs.”

At the same time as production quantities and sales have increased, so have the requirements for more expertise applied to the issues of wear-resistant materials in extruder construction, and processing expertise from the extruder supplier. “It’s not just wear rate we are fighting here but corrosion resistance as well,” Jones said. “It is universally accepted that for the best quality extruded product you need to have low moisture content in your formulation.”

Cincinnati Milacron is seeing a significant rise in inquiries for replacement screws and barrels for competing machines due to screw breakage and excessive barrel wear. The company provides tungsten-coated screws and barrels for WPC production to provide longer life in WPC applications.

Additionally, Jones noted, “High wood loadings have been popular and fashionable in Europe in the past, but as these products are starting to suffer and fail under outside conditions, the need for formulation expertise and wood-fiber encapsulation is now much more evident.”

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