The vinyl siding industry will continue its contraction with Associated Materials LLC's plans to curtail production at its Ennis, Texas, plant and warehouse. The Cuyahoga Falls, Ohio-based company plans to relocate some of its extrusion lines to plants in West Salem, Ohio, and Burlington, Ontario, according to filings with the Securities and Exchange Commission.
The company is expecting about $5 million in losses due to moving costs and loss of income, the filing said.
The company did not disclose the number of layoffs or shutdown lines related to the move. Associated Materials officials did not return phone messages.
The move comes as little surprise to industry watchers who have said the economic climate in the vinyl siding industry was going to get worse before its gets better.
``This is another indicator that there is capacity overhang in the vinyl siding industry,'' said John Pruett, a principal with Exton, Pa.-based consulting firm Principia Partners in a Feb. 1 telephone interview.
``Another vinyl siding plant closing in Texas doesn't surprise me,'' he said, ``given the success of other siding materials based on architectural preferences in that region.''
Kearney, Mo.-based Ply Gem Industries Inc. is in the midst of closing a 180-worker siding plant in Denison, Texas.
Fiber cement, manufactured stone veneer, stucco, brick and other masonry dominate exterior wall cladding in the Southwest United States, Pruett said.
``[Associated Materials] probably chose that location in Texas to be close to its PVC resin supply in Texas and Louisiana,'' he said. ``You don't put extrusion plants near raw-material supply. You select manufacturing sites near demand. And demand for vinyl siding is concentrated in the Northeast and Midwest.''
Most of the major players in vinyl siding are diversified into other product categories, which helps them deal with the razor-thin margins in siding production.
``Like the other top players in vinyl siding, [Associated Materials] is diversified into other product segments, such as aluminum, and vinyl windows,'' Pruett said.
One question to ponder, he said, among the recent string of plant closings: What happens when demand rebounds?
``If vinyl siding is nearly 40 percent of all siding demand, what's going to happen when demand rebounds in 2009 or 2010?'' he said. ``Is the vinyl siding industry going to have too little capacity to meet demand?''
Valley Forge, Pa.-based CertainTeed Corp. plans to shut down two of its vinyl siding plants in the spring. CertainTeed siding operations in Social Circle, Ga., are scheduled for a May 2 shutdown - the plant will remain open, however, and continue to manufacture cellular PVC restoration millwork and trim products. The company plans to shut down its plant in London, Ontario, on March 30.
Ply Gem closed its 110-employee plant in Atlanta in the first quarter of 2007.