Output of Fencing & Decking Exceeds Expectations

Like all segments of the U.S. residential building materials market,

production of rigid PVC fence and decking products is down from last year's

level. But they have not declined nearly as much as other PVC building

products, such as pipe, siding, and window profiles. Computations based on

our Fencing and Decking Business Index show that output is down 5% this year.

But our indicators show that PVC pipe output plummeted 18% while vinyl siding

and window profiles are off about 8%.
It will take two or three more quarters before residential construction finds

its footing and starts to register growth. Therefore, we expect that while

the sales of PVC fence and decking will continue to perform better than sales

of most of the other building products, they will show negative growth until

at least the first half of 2009.
After a flat 2007, production of PVC fence such as temporary fence,wire mesh,

fence manufacturers,steel fence post,wire fence,portable fence and decking

will decline 5% in 2008. Next year will get off to a sputtering start, but by

year's end, residential construction will begin a slow rebound and demand for

fence and decking will expand by 8%.
One factor in this forecast is trends in residential construction. So far

this year, new housing starts are a whopping 30% below the already-low level

of 2007. That's down more than 50% from the peak a couple of years ago.

Fortunately, new houses are not as big a market for fence and decking as are

improvements to existing homes. Spending on such improvements has declined a

more moderate 8% in 2008. But the downward spiral in demand for new houses

has pulled down home equity values, access to credit, employment levels, and

consumer confidence, and this in turn inhibits consumers' appetites for home

improvements.
It will take until at least next spring before the situation begins to

improve. There is still a huge inventory of unsold houses, and with prices

continuing to fall, there is little incentive for buyers to return to the

market. Falling prices also make it difficult for banks to get a solid

reading on their asset valuations, and this uncertainty impedes their

willingness to lend money for mortgages. The only cure for this uncertainty

is a few months or quarters when the market stops falling and stabilizes. So

manu-facturers of building products will have to hold on until home buyers

and lenders become more confident of market conditions.
As if falling demand was not painful enough, suppliers of all types of

plastics products have had to contend with rapidly escalating resin and

energy prices. The run-up in prices of energy and other commodities has

undoubtedly had a negative effect on construction activity, but the good news

is that the remedy to this problem appears to have already emerged. Oil

prices appear to have hit a peak in mid-2007, and since then the predominant

trend has been downward. This is due primarily to declining demand. The

hurricane season and continued geopolitical uncertainty will prevent energy (

and resins) prices from falling as quickly as we would like, but the trend to

reduced consumption will persist. This portends decreasing prices of crude

oil and natural gas through 2009 and beyond-and declining resin prices as

well.
In summary, the outlook for manufacturers of PVC fence and decking products

is for little change in market conditions for the remainder of 2008 and the

first few months of 2009. As 2009 progresses, resin and energy prices will

gradually decline, but they will likely stay at high enough levels to sustain

the drive towards greater efficiency and "green" products. All of this will

set the stage for a return to solid growth in demand for all types of rigid

PVC building products in 2009, and the fence and decking segment will

continue to outperform other product segments.

David ZHENG is the CEO of http://www.china-fence.com .A company specialized in selling all kinds of fence products such as temporary fence,wire mesh,fence manufacturers,steel fence post,wire fence,portable fence etc.