Ken Silverman, chief executive officer of Silver Line Building Products Corp., knows how difficult it has been to pass raw material price increases on to his customers.
But North Brunswick, N.J.-based Silver Line is growing, despite the run-up in resin prices experienced after the hurricanes of 2005. His firm, he said, is positioned for a record year in 2006.
``Costs continue to rise,'' Silverman said in a Jan. 12 interview at the International Builders' Show in Orlando. ``But you have to continue to grow the business.''
While showgoers studied Silver Line's storm-resistant extruded vinyl windows and injection molded basement hopper windows, Silverman talked about how his company is searching for locations for new extrusion plants in Lakeland, Fla., and the Denver area, as it continues to add capacity in Durham, N.C., and Dallas.
Silverman was not the only official to talk about the need to make investments. Several other companies said they were not going to let high resin prices discourage them from growing in 2006.
Whether passing costs on to customers or eating them internally, all plastics processors are in the same boat when it comes to dealing with high material costs, company officials said.
``I've been in this business for 30 years, [and] there's never been a period when it's been this volatile,'' said Gary Acinapura, Alcoa Home Exteriors president.
``Having said that, as we go through that transition, there is some good that comes out of that. ... The whole supply chain had to react to the crisis. It caused different behavior. ... I think we're better off as an industry.
``There's still a lot of concern on the part of the contractors now, who are on the front end, trying to say, `Hey, will my customers pay for this?' There's some concern about whether or not discretionary income will be going toward other things or whatever, and we'll just have to play that out as the year goes on,'' Acinapura said.
Composite deck maker TimberTech Ltd. of Wilmington, Ohio, a unit of Columbus, Ohio-based Crane Plastics Co., uses 100 percent virgin polymer in its decking systems.
``It's about consistent quality,'' said Paul Bizzarri, TimberTech's vice president of innovation. ``Every business has a cost structure to deal with.''
Moreover, TimberTech officials won't be afraid to tinker with their process if they think they can improve it or the product.
``We'll always reformulate if we find a better way to do it,'' Bizzarri said.
Jim Ziminski, president of Crane Performance Siding, added: ``[Resin pricing] impacts everyone equally. That's not to say we're not going to try and get more efficient.
``We have a plan as a company, and market pricing is not going to alter our plan.''
Even companies that use 100-percent recycled material, like Springdale, Ark.-based Advanced Environmental Recycling Technology Inc., have seen costs skyrocket in the past year.
``Our recycled material is up 11 percent,'' said Don Compton, a sales representative for AERT's ChoiceDek composite decking line. ``We have to pass that on. But consumers are still buying it up.''
To stay alive, companies must invest in themselves, Ziminski said.
``We're constantly reinvesting,'' he said. ``And it's easy to not. But if you don't, you're three to four years behind the curve.''
As for macroeconomic factors, several economists shared their insight for 2006 during a Jan. 12 news conference.
The overall U.S. economy is doing well, and unemployment will stay around its current level, they said. Expect one more increase in interest rates at the end of January. Housing starts will edge down modestly over the year, economists said, affected by a slight decline in investor activity.
``The big question mark is, in 2005, how much of the activity was connected to investors or the speculators for the market?'' asked David Seiders, chief economist of the National Association of Home Builders in Washington.
``Have we forecast five consecutive years of records? No,'' said David Berson, chief economist with Fannie Mae. Unprecedented investor demand pushed up housing demand and the want for second homes.
``It's been a heck of a run so far,'' Seiders said.
For the remodeling market, home improvement spending edged up in 2005, ending the year growing 4.3 percent over 2004 levels, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Mass.
Homeowners spent $149.5 billion on remodeling in 2005.
``We are starting to see signs of softening in the market,'' Nicolas Retsinas, director of the Joint Center, said in a Jan. 13 news release.
``Rising short-term interest rates and slowing home price appreciation have tempered homeowner spending on home improvements.''