Construction still seems to be a growing market for North American plastics processors, even though the economic outlook for 1999 is unfocused, to say the least.
Boom or bust, this year probably will see further separation between the plastics companies who win at the construction products game — and those who lose.
Economists who gathered in Washington in November for the semiannual Construction Forecast Conference of the National Association of Homebuilders tried to stir factors like interest rates, demographics, unemployment and gross domestic product into a housing forecast. But each came up with a different brew. Some predicted downturns. Others predicted varying degrees of status quo. All acknowledged 1998 will be a hard year to beat.
Of course, their predictions were made two months ago, and most likely have been overtaken by the steaming behemoth known as the U.S. economy.
That's where consumer psychology comes in. If people feel confident about the economy, and their place in it, they will be more willing to invest in new or existing living quarters.
In uncertain times, people will tend to make more conservative — less costly — investments aimed at beefing up the perceived value of their current holdings.
That's why plastics provide many win-win situations in construction.
Plastic siding, windows, plumbing, floors and countertops in many cases are becoming the norm for new homes as well as remodeling projects.
The downside for plastic processors is not only finding ways to make money in a slumping economy, but also finding a way to make a profit selling into a superheated buyers' market.
There is fierce domestic competition, and a slumping economy in Asia means low-cost products and materials made there are attracted to the powerful pull of the voracious U.S. economy. U.S.-produced goods meant for Asia — especially high-export products like plastic resins — stay at home, affecting the supply and demand chart.
Doing business, even in the world's only economic superpower, is a challenge. But there are some perennial winners.
Success stories in the field share some common plot lines:
cThe winners are innovators. They produce unique products the world can't do without, even if people have survived for eons without them. Royal Group Technologies Ltd. is an example with its all-vinyl construction system.
cThe winners hold most — if not all — of the cards. They integrate as much of the raw material chain into their everyday operations as possible. Examples include Royal Group Technologies, CertainTeed Corp., the newly expanded Eagle-Pacific Industries Inc., and the Taiwanese-derived J-M Manufacturing Inc. and Westlake Group.
The winners don't stay in one place fighting over the same trampled territory, especially if they are not members of the integrated club. The exit of Lamson & Sessions Co. and Cantex Inc. from the cutthroat sewer pipe business to concentrate on higher-margin conduit is an example.
Whether or not 1999 turns out to be a good economic year, it's fairly certain plastics will make further strides into the construction industry.
The question becomes which companies are ready to take advantage of the opportunities, and which companies will fall by the wayside?
In today's volatile economy, time won't take long to tell.
Urey is a copy editor at Plastics News.