The large-diameter pipe market is on a growth trajectory whose demand will reach 208 million feet by 2009, and plastic pipe systems overall will benefit greatly, according to a recent study by Cleveland-based Freedonia Group Inc. and other industry sources.
The industry itself saw manufacturers gearing up to serve the market, especially with Advanced Drainage Systems Inc. of Hilliard, Ohio, announcing its purchase of competitor Hancor Inc. of Findlay, Ohio, in April. That deal still has not closed. The Federal Trade Commission made a second request several weeks ago for additional information on the proposed merger.
``For a merger of this size, it's pretty normal,'' said Omar Diaz, vice president with Houlihan, Lokey, Howard & Zukin, the Chicago investment bank working with Hancor.
``We're fully optimistic that the deal will close,'' Diaz said by telephone June 6.
According to an FTC spokesman, generally speaking, a small percentage of cases get a second request.
``But it's not a statement on the deal or the investigation,'' the spokesman said. ``It's just a statement of fact.''
Upon that closing, the transaction itself creates the largest plastic pipe company in North America.
``Our collective abilities to compete against alternative materials for storm and sanitary applications will be greatly enhanced,'' ADS President Joe Chlapaty said.
``These are very challenging times for the high density corrugated business,'' he said. ``There appears to be a permanent paradigm shift in energy and raw material costs. The combination of ADS and Hancor will allow the [new] company to effectively deal with tremendous cost pressures that have been brought to bear as we attempt to compete with alternative materials.''
Freedonia Group forecast the demand in the United States to increase 2.4 percent yearly to nearly 208 million feet in 2009, valued at $8 billion.
There are several factors affecting marketing growth, including population growth, aging pipe infrastructure, and clean water and other regulations and concerns over drinking water safety, according to Freedonia.
Although concrete pipe will remain dominant, Freedonia said, plastic pipe will have the best opportunities, based on performance improvements and cost and installation advantages over other materials.
For its study, Freedonia categorized large-diameter pipe as HDPE pipe of 18 inches or greater and PVC pipe of 15 inches or more. Freedonia also tracked, as part of its study, reinforced thermoset of 16 inches and larger, said spokeswoman Corinne Gangloff.
HDPE players that serve the storm-water market received a boost when ASTM International of West Conshohocken, Pa., issued a new HDPE pipe specification in April. The standard, F2306, for 12- to 60-inch pipe opened the door for HDPE to be specified in municipal storm-water drainage applications, according to several sources.
``Municipal engineers specify to a large degree with principally ASTM standards,'' John Kurdziel, director of technical services and market development with ADS, said in a news release.
``The development of F2306 now provides municipal engineers with a tool and a means for specifying HDPE pipe,'' he said. ``This standard will significantly increase the number of applications for HDPE pipe and will provide an economic benefit to both cities and manufacturers.''
The industry is seeing optimism and growth in other segments of the large-diameter pipe market. On the PVC side, Vinyltech Corp., based in Phoenix, reached maximum output levels in 2004, according to the annual report of its parent company, Otter Tail Corp. of Fargo, N.D.
The firm makes large-diameter PVC pipe for municipal water, waste-water, and water reclamation systems. Through 2004, the firm had daily average production of 285,000 pounds of pipe, shipping 290 truckloads a month.
Significant population growth in the southwestern United States is causing strong demand for Vinyltech's products, and the production output and sales volumes for 2004 were the highest in the company's 22-year history, officials said in that report.
In May, polyethylene pressure pipe maker PolyPipe Inc. of Gainesville, Texas, announced plans to expand its Fernley, Nev., plant to include large-diameter pipe production. That firm makes large-diameter pipe for industrial, water, waste-water and mining.