Fiberon LLC executive Bill Ross said the firm is “looking at investing in new raw material sources” to gain more control over the price of those materials in its decking.
Ross, sales vice president, would not disclose whether that potential investment is related to Fiberon's wood-plastic composite or cellular PVC decking, but in an interview at Deck Expo in Chicago, he confirmed that the firm was actively developing investment plans.
However, Ross did shed light on raw materials issues at the Principia Partners Wood-Plastic and Natural-Fiber Composites conference in Charlotte the week before Deck Expo.
“There have been horrendous increases in prices the last few years in PVC,” he said at the WPC conference. “The demand on PVC slowed down, but the prices didn't decline. It has been like a linear equation. That's not the same with WPC [wood-plastic composites].”
In WPC, there's another issue altogether — the plastics film recycling plant that Advanced Environmental Recycling Technologies Inc. opened in Watts, Okla., 18 months ago. AERT said the plant has reduced the firm's raw materials costs by 20-30 percent, giving it a cost advantage over many of its competitors.
Ross said rising raw material prices present a challenge for the entire industry and could trigger price increases of finished goods, he said. Tightening production costs alone may not be the answer, he added.
“I don't think efficiencies in manufacturing will get you very much. Companies have to develop new sources of raw materials, and achieve reductions in weight” without sacrificing strength or quality, he said. He also said the industry needs to do a better job of promoting alternate decking.
Of equal concern are the new lower levels of decking inventory at both dealers and distributors the last six months. Those low inventories could be self-defeating down the road for both those channels, as well as for makers of WPC and cellular PVC decking, he said at Deck Expo, held from Oct. 12-14.
“The market took a dive in May at the dealer level, and in July at the distributor level,” he said, because of skittishness about the economy that has those channels reluctant to tie up cash in inventories.
“The average dealer would like to special order everything because there is only so much money available,” he said. But that adds roughly 30 percent to the cost of alternative decking materials, according to Ross.
“I'm concerned that the desire to not stock product will drive costs up to a level that makes it less affordable and preclude a large number of people from buying the product,” he said. “That's as much an increase in price as the industry has seen [combined] since its inception.”
Ross said the industry has to educate dealers and distributors and give them incentives. “We have to get them to understand the importance of maintaining inventories at the dealer location so the deck builder has access to it and the price is not inflated,” he said.
A low-inventory strategy also could backfire when the economy turns around, he said. “I'm concerned that dealers will be slow to add inventory and not have enough product as the economy recovers.”
Ross said Fiberon's sales are “up and remain ahead of last year's sales” — which he said “grew at double-digits,” without giving figures. “Our capacity was sold out through the end of last year, and distributor sales are way up over last year,” he said.
Regardless, he said the industry as a whole is working to boost the overall category of alternative decking rather than capitalizing on the opportunity for market penetration.
“The economy has caused the decking industry to contract,” Ross said at the Principia event. “Fewer decks are being built and those decks that are being built are smaller. The disenchantment of the past [products that failed to meet consumer expectations] have slowed momentum in the category.
“The big question is will this industry reach its potential and reach the level of flipping people from wood that it can,” he said. “To do that, we have to make products that meet the aesthetics and expectations of consumers.”