The North American residential decking and railing market dropped from $4.6 billion in 2006 to $2.8 billion in 2009 reflecting a 40% decrease over this time period. These changes have been caused largely by the deep economic recession which has dramatically reduced the homeowner’s ability to finance a new deck or replace an existing deck.
About 2.5 million decks are expected to be built on residential structures in 2009, and over 90% are on existing homes as part of a remodeling project or replacement (R&R) of an existing deck. Job losses, tight credit, devalued homes, the inability to tap into home equity to finance home improvement projects, and record lows in consumer confidence have combined to push decking and railing demand back to levels that have not been seen since the early 2000s.
Further, an important shift has occurred over the past two to three years. Wood is regaining share from synthetics, which include wood-plastic composites, primarily driven by demand elasticity due to lumber deflation while petroleum-based synthetics have experienced significant raw material price escalation. Wood decking and railing had steadily lost market share to synthetics since the introduction of composite products in the mid to late 1990s based on performance and maintenance benefits. Wood market share, on a volume basis, hit a low in 2007, maintained its position in 2008, and reversed in 2009.
Steve Van Kouteren, a Principal at Principia Partners, says “Although the entire synthetic category has lost share to wood, demand for cellular vinyl decking has been growing at a double digit rate while the demand for polyolefin-based WPCs has decreased. This disparity is due to the growing popularity of ultra-low maintenance decks among homeowners.
“The market has two primary forces at work. On one end of the decking market, consumers are fighting money and budget issues and are scaling back deck projects, as well as using less expensive materials. Conversely, there is a high end of the market that is less price-sensitive. This segment is using new synthetic materials, and is driving the increase in demand for cellular vinyl.”
Mr. Van Kouteren continues “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. Total value for WPCs and cellular vinyl is estimated at about $725 million or 26% of the decking and railing market in 2009. Total North American demand for cellular vinyl in residential decking has grown from about $5 million in 2004 to over $95 million in 2009.”
The future is brighter for decking and railing as homeowner desire for quality leisure time and outdoor living in the backyard or front porch of the home is part of the fabric of American living. Residential decking and railing demand is expected to improve in 2010 compared to 2009, as home construction and R&R recovery begins.
An increase in housing starts and modest growth in R&R activity will increase the demand for decking and railing, on a value basis, about 10% in 2010 from its bottom in 2009. About 6% of the growth will result from volume growth and another 4% from product mix and a slight recovery in wood prices. Pent-up demand from consumers will help support decking and railing growth in 2010. Total decking and railing demand is expected to increase from $2.8 billion in 2009 to $3.1 billion in 2010.
Principia's latest study COMPOSITE DECKING & RAILING 2009 serves as an important baseline analysis for year-over-year forecasting and business planning purposes by existing and new industry participants. Headquartered in suburban Philadelphia, Principia Partners is a leading boutique strategy consulting firm that serves the broad building products and construction materials industry as well as other materials-related industries.