U.S. housing recovery will benefit cellular vinyl, not WPCs: study

Residential decking and railing demand is expected to improve in 2010 compared to 2009 as home construction and R&R recovery begins – a development that will benefit cellular vinyl but not wood-plastics composites (WPC), according to a new study by market research firm Principia Partners.

“Lumber and resin price volatility has affected the substitution dynamics between composites and wood decking and railing,” the study – called Composite Decking and Railing 2009 – said. “For example, pressure-treated lumber prices dropped steeply as the residential housing market tanked, just when resin prices were skyrocketing.”

The North American residential decking/railing market dropped from US$4.6 billion in 2006 to US$2.8 billion in 2009, the study said, changes caused largely by the deep economic recession which dramatically reduced the homeowner’s ability to finance a new deck or replace an existing deck.

Total value for WPCs and cellular vinyl decking is estimated at about US$725 million, or 26 per cent of the total decking and railing market in 2009, the study continued. “Demand for cellular vinyl in residential decking has grown from about $5 million in 2004 to over $95 million in 2009,” the study said. “Cellular vinyl demand growth is at the expense of polyolefin-based WPC decking. As a consequence, composite decking is losing market share to wood on the low end and losing market share to cellular PVC on the high end.”

Reduced demand, combined with resin prices, severely stressed WPC suppliers’ margins and forced the closure of plants and overall reduction in capacity, the study said. “Several large players, as well as small start-ups, have exited the business.”

“The number of renovation and remodeling projects financed via home equity will not soon reach the levels of the boom years. Discretionary remodeling projects take a back seat to more necessary projects that improve energy efficiency and the structural integrity of homes,” the study concluded.

For more on the study, click on this link.