PVC pipe and conduit makers are going into full-fledged survival mode in 2009.
Price-driven competition combined with free-falling resin pricing near the end of 2008 created a brutal environment for pipe and conduit extruders as they were forced in some cases to sell pipe for 20 cents less per pound than they paid for the resin to make it.
``People out there have too much inventory and they're going to try to get rid of it, which will keep the market depressed,'' said Bill Raffaele, president of Weatherford, Texas-based Heritage Plastics Central Inc.
``Right now, there's too much capacity in the market for the demand. I cannot see that changing until 2010 probably the second quarter of 2010,'' he said.
It also doesn't help that pipe and conduit projects are inevitably linked to the construction sector, currently in a historic downturn.
Pipe companies have, and will continue to, cut where they can and are hopeful they will be among those left standing once the bulls finally return to the market.
Some pipe officials are cautiously optimistic that President Barack Obama's plans to invest heavily in the nation's infrastructure, as part of his jobs-creation plans, could trickle down to the pipe makers as various cities and municipalities replace failing infrastructure.
``We can always hope that with some of the new investment comes some new projects,'' said Jim Rajecki, general manager of Beachwood, Ohio-based Prime Conduit Inc.
A trend toward burying power lines underground vs. the overhead lines and power poles commonly seen in older neighborhoods serves as a legitimate replacement market for PVC conduit companies.
Infrastructure improvement could help buoy sales in a tough year, but nowhere near enough for processors to relax, officials said. Keeping inventory in line and watching costs will be critical this year, Raffaele said.
``We dropped our inventory to all-time lows and we let attrition take care of our workforce,'' he said. ``We reduced overhead without laying anyone off. We did put a moratorium on wages for 2009 and strict controls on spending.''
On the flip side, firms have to have the inventory needed to fill any given order, or customers are likely to take the business elsewhere, said John Davies, plant manager in Auburndale, Fla., for Cantex Inc. of Forth Worth, Texas.
``We recognize that we might have to operate at a loss for the short term. ``It's part of our investment in the future,'' he said. ``The profits probably aren't going to be there, but you have to look long term to some degree.''
Rather than permanently shutting down plants, Cantex has implemented a system where it systematically shuts down plants on a temporary, rotating basis.
``It preserves a larger nucleus of the workforce,'' Davies said. ``It will make the ramp back up a little more instantaneous if you have the technical people on board ready to go.''
The market is totally unpredictable right now, said Tom Walsh, a Houston-based consultant to the pipe industry.
``I had projected 2008 for some growth, but I don't think that happened,'' he said. ``Anybody's projections are out the window.''
The market craves positive news and stability, Rajecki said.
``I think once there is some sustainable news that things have bottomed out, that you will see people making different decisions,'' he said.
``But in the meantime, it's survival mode for all of us. We're going to watch our inventories and costs like a hawk, and weather the storm.''