For the first time since 2005, manufacturers of plastic building products can expect demand for their products to increase this year.
Demand and production will still fall short of a less-than-stellar 2008, but for the first time in a long time, experts say things are finally moving in a positive direction.
The collapse of the U.S. home construction industry pulled building products makers down, and the industry's recovery should prompt a rebound.
About 560,000 new residential units were built in 2009, according to the Washington-based National Association of Home Builders. NAHB expects just under 700,000 new residential units to be constructed in 2010, Bernard Markstein, an NAHB vice president and senior economist, said in a telephone interview.
“We're not even talking about getting back to 2008 levels,” Markstein said.
That conclusion is supported by the findings of “The Profile Extrusion Business in the New Normal Economy” — a study of the plastic extrusions market released in December by Advance, N.C.-based Plastics Custom Research Services.
According to that report, it will be 2012 before plastic building products eclipse 2008 levels, and 2014 before the market fully recovers back to the levels seen in 2005.
Peter Mooney, president of Plastics Custom Research Services, said he does not like sounding like a pessimist, but he refuses to sugarcoat what he believes to be fact.
“I'm not going to be an outlier when most of the people I read, who know more about the economy than I do, say it's going to be slow,” he said. “It's going to be three, four or five years. It's going to take a long time to get back.”
This is a new financial reality, he said, and an entirely different animal from recessions past.
“Recessions in the past have been inventory-driven,” Mooney said. “We had a boom. People produced a lot of stuff, and either the Federal Reserve raised rates or the government raised taxation.
“But this is a financial crisis, and will operate differently. It has hollowed out key parts of Wall Street and Main Street.”
The news would be brighter if the troubles were limited to the United States, he said.
“This is a synchronous financial crisis — a global recession,” Mooney said. “This is not just our problem. Our trading partners, or competitors, are in trouble too.
“This is a very different system than 2001. Even from the oil crises of 1973 and 1979. This one is trouble.”
While there are not really any bright spots in the building products arena, manufacturers can take heart in that all the data forecasts are positive for the foreseeable future.
Heading into 2009, 14 percent of profile extruders expected sales increases for the year, and 52 percent expected a decrease. Entering the new decade, 57 percent of extruders expect an increase in 2010, and just 3 percent expect a decrease, according to the PCRS study.
The construction industry is still at very weak levels and has a number of challenges facing it — specifically income lost on unemployment and a tight credit market that is locking previously credit-worthy buyers out of the market.
No end market is immune from the troubles, and unique market forces are creating further challenges in certain segments.
In the window industry, for example, several window manufacturers that had specialized in residential windows expanded operations to include commercial-grade windows, said Nick Limb, managing partner with Ducker Research Co. Inc. in Bloomfield Hills, Mich.
When the residential market started to dip, the commercial market was still a relatively stable, growing market for about two years after.
“Now, the commercial side of things is still heading down. People crossed over. Commercial provided them an offset when the residential housing market dropped so precipitously. Now, that crutch has been taken away,” Limb said.
“There's light at the end of the tunnel. But we're still in the tunnel,” he said.
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