Say goodbye to 20 percent growth, robust sales to the repair and remodel market, and what was seemingly a constant influx of new participants to the wood composite decking category.
Say hello to a mature, consolidating market, industry officials say. Say hello to sustainability.
``There's broad agreement that the growth rates in wood-plastic composite deck and railing have come down to more sustainable levels. It's more or less in the 5-10 percent range the last couple of years,'' said Steve Van Kouteren, a principal with Exton, Pa.-based Principia Partners, a consulting firm for the building product and plastics industries, among others.
``The hypergrowth of 15-20 percent is just not sustainable,'' said Van Kouteren. Principia recently wrapped up its annual Wood-Plastic and Natural Fiber Composites conference, held Oct. 8-9 in Baltimore.
Composite decking makes up 19 percent of the $6.2 billion deck and railing market, according to Principia data. That is up about 5 percent from 2004.
Van Kouteren, along with the established composite decking manufacturers, remains bullish on the category, but cautions that the sluggish residential construction market will continue to challenge deck makers.
``I think it will continue to grow, but given the high price differential between pressure-treated lumber and composites, combined with the really dramatic slowdown in housing, it still has a ripple effect thought the industry,'' he said.
``We're going to see a slowdown in the growth even more.''
Many homeowners are in a financing pinch as depreciating markets are squeezing available home equity traditionally used for home-improvement projects. On top of that, a series of mortgage payment increases are slated for many who signed up for adjustable rate mortgages during the recent financing boom.
The mortgage squeeze could influence consumers' shopping decisions regarding which materials they choose to invest in for their outdoor living needs. As of the first quarter of 2007, composite decking was priced about three times higher than pressure-treated lumber at an average selling price of $2.25 per lineal foot. Pressure-treated was selling for 71 cents per lineal foot, according to Principia research.
``It's obviously a challenging space right now,'' said Marty Grohman, president of Correct Building Products LLC in Biddeford, Maine. ``For those of us with flat sales, or just slightly up, we're feeling good about ourselves.''
Despite the market conditions, Doug Mancosh, president and chief executive officer of New London, N.C.-based Fiber Composites LLC, remains unfazed.
Composite deck and railing sales are expected to grow by 7 percent per year through 2009, he told conference attendees in his keynote address.
``The drivers of growth are everlasting and constant,'' he said.
Those drivers moving forward will be continued product innovation from manufacturers, cost improvement and competitiveness, and meeting the needs and wants of consumers, Mancosh said.
``The consumer ultimately arbitrates our product,'' he said. ``Consumers are getting smarter and more informed [about composite decking]. ``That's a very good thing for us. Installers are gaining expertise. This also is a very good situation for us.''
Mancosh said it, and many industry officials agree: Market penetration opportunities exist both on the premium end of the alternative decking market, and on the lower-priced, value end of the market.
``We have some real cost challenges ahead of us,'' he said. ``Our job is to balance cost, quality and performance.''
What were previously inexpensive materials are getting pricier as demand rises.
``Wood sourcing is increasingly challenging and more expensive,'' Mancosh said. ``Recycled polyethylene is going up along with virgin. We have to open up to other material streams, and that affects quality.''
Among the ideas industry officials are floating for lowering costs are reducing profile thickness, exploring alternative filler options, and foaming.
Foaming has been called the next generation of wood composite extrusion. It is already commonly used in making nonstructural fence profiles, but has yet to gain widespread traction in deck boards.
Only Toronto-based Composatron Manufacturing Inc., using licensed Strancel technology, is foaming wood composite deck board and selling it commercially.
Cellular PVC, which is fast becoming the material of choice on the premium end of the alternative decking market, is made by foaming vinyl. The technology has been used for decades in the trim and moldings market.
Thus far, deck makers have been unable to extrude foamed boards with the same efficiency and product quality of its existing products. ``To do it well at really high speeds and get a consistent product is difficult,'' Van Kouteren said. ``It doesn't seem like foaming has come out to the forefront. The trade-off clearly isn't there yet where they can do it very profitably.''