In B&C, pipe defies housing woesIn B&C, pipe defies housing woes

Siding slides, but pipe demand remains ripe.

The housing industry in the U.S. is in disarray, with even the biggest homebuilders in the U.S. feeling the impact of the slump and the credit crisis. In the rest of the developed world, the market remains more docile, while it continues to grow at GDP multiples in many developing lands.

In August, according to a report from Global Insight Perspectives, U.S. housing starts fell 2.6% relative to July and were down a stark 19% from a year earlier. Building permits, which tend to be an even better indicator of activity in the residential market, dropped 5.9% from July to August and 24% year-over-year. “Moreover, the worst is yet to come,” notes the report. “Construction of new single-family houses should hit bottom in the second quarter of next year.” The report notes that building materials used predominantly in residential construction face the greatest obstacles as demand for these materials has plummeted. So, where can one find a ray of hope in this industry? Non-residential construction seems to be the bright spot in an otherwise dim outlook, taking up the slack in demand for building and construction products left by the residential downturn.

According to a report released Aug. 29 by Reed Construction Data, the value of non-residential U.S. construction starts through July 2007 totaled $180.4 billion, 20% higher than during the same period in 2006. Non-residential starts in July, at $30.2 billion, were only 1.5% below June’s record-high level, and 31% above those of June 2006.

One sector seeing strong demand around the world is the pipe industry. Growing use of plastic pipes in place of traditional materials such as steel, copper, and cast iron is expected to drive growth in the market, according to a new report by Global Industry Analysts Inc. (San Jose, CA). Rapidly growing economies in Asia-Pacific, the Middle East, and Latin America are expected to propel demand for plastic pipes in telecommunications and natural gas distribution systems. Additionally, advancements in drinking water transfer systems and sewage and drainage systems are also expected to drive market expansion. China is a key market shaping Asian as well as global dynamics, as introduction of HDPE pipe there is adding to the growing market for these.

The U.S. is the largest market for plastic pipes worldwide, estimated at 2.1 billion meters in 2007. Europe is the second-largest market, followed by Asia-Pacific. The U.S. and Asia collectively account for close to 80% of the global plastic pipes market. PVC pipes represent the largest market segment, estimated at about 4 billion meters in 2007, said Global Industry Analysts. PE pipe is the second-largest segment with sales expected to reach 2.3 billion meters by 2010. PP pipe remains a relatively small segment, and is projected to grow at a CAGR of 6.8% through 2010.

Wolfgang Studener, president of extruder manufacturer Battenfeld Extrusionstechnik (BEX; Bad Oeynhausen, Germany), says results at his firm, one of the largest in the field, essentially support the reports’ findings. Profile extrusion processors are slowing investment in new equipment and capacity, he says, but pipe profile processing continues to see rapid gains. One reason, he explains, is that copper’s price has risen so dramatically that more builders are reaching for plastic pipe for hot/cold water systems. In India, he says the market for PVC pipe has grown in just three years from 600,000 tonnes/yr to more than 1 million tonnes/yr, with no slowdown in sight. “Due to the global situation—particularly problems with losing water in old pipes—we reckon with growth for years to come,” he adds. “At BEX we used to be happy with 3-5%/yr demand growth—and it’s been 10-15%/yr for the past years. It’s enormous!”

Green building is still very much in the forefront of the industry’s initiatives for 2008, so it can be expected that the push for these products will continue. “Sustainable construction is undoubtedly one of the biggest and noisiest topics in our industry today,” says Eric Nilsson, VP of corporate marketing at building products supplier CertainTeed. Cladding and window sills made from 100% recycled PVC are examples of how the material can be used in new building products without loss of performance, claims Roger Morton, of Axion Recycling in Bramhall, England.