Many sectors of the North American plastics processing business have experienced difficult market conditions over the past few years stemming from the U.S. recession in the first half of 2001, the terrorist attacks in the second half of 2001, and the surge of imports from Asian countries in 2002 and 2003. Yet the companies with custom, proprietary and captive profile extrusion operations have managed to come through this period with sales growth reasonably close to their long-term trend line. This is largely due to the fact that the majority of their output is directed to the building and construction industry which, along with the automotive industry, has benefited from sustained consumer spending. Here in 2004 the rising cost of raw materials is putting pressure on product pricing and profit margins, and the recent rise in mortgage interest rates may serve to dampen demand for new residential construction. However, residential remodeling will probably continue apace. As a result annual sales of profile extuded products, which attained a level of $11.3 billion in 2003, should grow on average by 6% to $15.1 billion by 2008.
As several long-term primary building and construction applications such as siding and window and door lineals approach maturity the profile extruders have turned their attention to a whole new range of architectural products - namely, decking, fencing and railing. There are several market push and pull factors at play here. For example, the standard material of construction for these products is pressure-treated wood, and new environmental pressures have forced the wood-treaters to change the chemical composition of their preservatives. The result is a more expensive and lower performance product, and this creates a window of opportunity for the profile extruders. The material options at their disposal include extruded plastic lumber, hollow and solid plastic profiles, coextruded capstocks, and wood/plastic composite material.
The sense we derive from our survey of officials at 100 North American profile extruders, as well as their material and machinery suppliers, is that there is little dramatically new in the way of technological change in the materials and machinery for profile extrusion. The concept of wood/plastic composite material has a long history in plastics processing, yet it is only in the past few years that its potential in decking, fencing, railing and other building and non-building products has been addressed. This is a field dominated by the larger players due to the high cost of machinery, specialty tooling, licensing and royalty fees, and the critical nature of distribution channels. Further penetration of wood/plastic composite material into building and non-building products will follow the refinement of material formulations and the streamlining of processing parameters.
With the advent of globalization several segments of the North American plastics processing business have found themselves exposed to a flood of imports of consumer and industrial products and the relocation of OEM manufacturing offshore. Each plastics processing method is an admixture of art and science, and the more art the more inherent competitive advantages held by North American companies with decades of processing expertise. This is true of profile extrusion, and so to date the domestic processors have enjoyed a surplus of exports over imports. However, there looms on the horizon a number of highly capitalized Chinese companies which intend to not only supply profiles to their emerging middle class, but also penetrate North American profile markets. This is the paramount challenge that lies ahead for the domestic profile extruders - namely, to make their plants and workforces even more efficient and to enhance their sales/marketing efforts to maintain their home markets and at the same time exploit emrging export opportunities.
ABOUT THE AUTHOR
Dr. Peter J. Mooney is the founder and president of Plastics Custom Research Services. Dr. Mooney holds a Ph.D. in economics from the University of North Carolina, and he has covered the plastics industry as a technical/economic market research analyst and consultant since 1980. He is a member of several plastics industry associations such as the Society of the Plastics Industry, the Society of Plastics Engineers, and the Association of Rotational Molders International. He is also a member of the National Association of Business Economists. He has researched and written over 75 multi-client reports, as well as over 100 single-client reports, in the field of plastics and related industries. He has organized, chaired, and made presentations to numerous conferences on critical issues facing the domestic and global plastics industry.