With cautious optimism about federal stimulus dollars finally trickling down to the plastics pipe industry, officials look forward to stronger growth prospects in 2010, with construction activity picking up and more aging pipe infrastructure being replaced.
Company officials said a greater emphasis on replacing leaky and failing pipe systems this year will help buoy business while they wait for construction to find healthy, sustainable footing once again.
The plastics pipe industry was down about 20-25 percent in 2009, according to industry watchers and pipe makers. This year it should see growth of 5-10 percent, they said.
PVC continues to gain market share from metal in the water-delivery segment, corrugated high density polyethylene is still making huge inroads for drainage pipe, and smooth-wall HDPE, which dominates natural gas delivery, is gaining market acceptance in potable water and other industrial applications.
The water leakage rates and subsequent lost dollars from the nation's aging buried infrastructure is enough to make any conservationist or cost-sensitive taxpayer cringe. Municipalities throughout the country collectively spend about $36 billion annually repairing broken water mains and replacing defective pipe. Every day, 6 billion gallons of water are lost from corroded or damaged pipe in the U.S., according to the Uni-Bell PVC Pipe Association in Dallas.
Those numbers frustrate smooth-wall PE pipe extruders, who say their joint-free, leak-free system will alleviate those problems.
About 50 percent of all the pipes used in Europe are PE, said Gene Palermo, president of Palermo Plastics Pipe Consulting in Friendsville, Tenn. About 90 percent of all installed pipe in the Scandinavian countries is PE, he said.
Palermo expects the major slowdown for PE pipe in natural gas to rebound, citing new developments in medium-density bimodal resins by Midland, Mich.-based Dow Chemical Co. as part of the catalyst.
“As these high-performance, bimodal materials enter North America, this is what will help increase the market share, just as it has been very, very successful in Europe,” Palermo said in a telephone interview. “Where I see growth potential for [PE] is in these bimodal materials, plus the market getting back to where it used to be.”
Composite, multilayer, polyamide and new large-diameter cross-linked PE pipe will all contribute to the propagation of plastic pipe throughout the building and construction industry during the coming up-cycle, he said.
All of these technologies will be discussed in length at the Plastics Pipe XV conference, to be held Sept. 20-22 in Vancouver, British Columbia, Palermo said.
Because of a greater public emphasis on conservation, PE pipe is getting more attention in water applications, but not necessarily more acceptance, said Tony Radoszewski, executive director of the Irving, Texas-based Plastics Pipe Institute.
Leakage rates in some municipalities is 40 percent, he said. And they accept it.
“When you have an industry that doesn't care about that, how can you sell them a leak-free system?” he said.
“Folks are oblivious,” said Kurt Waldhauer, president and CEO of machinery maker American Maplan Corp. in McPherson, Kan. “Propose a quarter-percent tax increase, and you'll have people lining the streets with signs. That same quarter percent, if you figure what it costs on an annual basis, you could save on water costs.”
Half of the country's installed pipe infrastructure is cast iron or ductile iron — the cast-iron systems being installed in the early 1900s. Cast-iron systems, because of their 2-inch-thick walls and over-engineering were designed to last about 100 years. Ductile-iron systems will last 50-70 years, Radoszewski said.
“The growth of the country in the first part of the century, then right after World War II, just exploded,” he said. “The majority of growth in the country was a product line that has a 50- to 70-year service life. So between 2010 and 2020, a lot of systems will be coming due.”
The group and its member companies continue to market their products to municipalities and decision makers throughout the country to educate them on the advantages that PE pipe systems provide.
Between 60 percent and 80 percent of new water systems being installed are PVC, which is preferable to corrosive metal alternatives, Radoszewski said.
While the non-pressure, corrugated side of the HDPE pipe business had not been immune from the economic downturn, officials at market leader Advanced Drainage Systems Inc. in Hilliard, Ohio, remain bullish on their industry and growth prospects moving forward.
Much like the window, vinyl siding and composite decking industries, there will be winners and losers in the pipe business, said ADS Chairman and CEO Joe Chlapaty.
“This economic downturn has created two buckets of companies,” he said by telephone. “Those who are weak and struggling to survive, and those who are strong.”
The country's infrastructure needs are not going away, he said.
“The population continues to grow, housing will come back, and you will have related commercial development — libraries, schools, businesses. We're bullish about the future. That's the way we at ADS are strategically positioning ourselves.”
The company puts its money where its mouth is. This summer ADS opened a new pipe extrusion facility in Kitchener, Ontario, and soon will open another near Drummondville, Quebec, where it already has a distribution yard.
The firm is hopeful that the federal stimulus plans will have positive effects in 2010, but they've had a reverse impact in the short term, he said.
“Many states did have projects ready to go, but then decided to wait for the Feds to pay for it,” he said.
Maplan is not waiting for stimulus money to rescue the industry, but counting on those companies with an entrepreneurial spirit to make capital investments, Waldhauer said.
He doesn't project much in the way of capacity increases next year, but he does expect many idled machines to be turned back on.
“As capacity gets turned back on and the machinery runs, our tooling business will be strong and pick up next year,” Waldhauer said. “Hopefully the recovery will be sustained and grow to appropriate levels. The stimulus, if it helps a little bit, that's fantastic.”
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