Treated decking ready for challenge from 3'next generatio n" a lternatives

f\evaNn FoR TREATED wood decking, which due to its Lf affodability has picked up market share during the recession, may take a hit from the next generation of composite products, according to a new study by Principia Partners. Wood treaters, however, don't necessarily agree, since the new products are even more expensive.

Total demand for decking and railing in the North American residential market was up slightly in 2010 compared to 2009,and is expected to increase more than 57o in 2011, to $3.4 billion. Growth is driven largely by price increases for most all plastic-based decking and railing, as well as continued product mix shift from lower-priced uncapped wood-plastic composites (WPCs) to premium capped WPCs and cellular vinyl decking.

"The market has enthusiastically embraced the new ultra-low maintenance (ULM) decking products," said Principia's Steve Van Kouteren. "Ultra-low maintenance properties and the new improved aesthetics drove demand for capped WPC decking by nearly six-fold in 2010 vs. 2009. In addition, the darker cellular PVC deckine with variegated colors, led by AZEK, Fiberon, TimberTech, and Trex, increased cellular PVC growth by nearly 40Vo in 2010. We expect these trends to continue through 2011 .*

Altogether, the ULM decking category, which includes capped WPCs and cellular vinyl, now accounts for nearly 45Vo of total synthetic decking demand, up from l5vo in 2008. Growth in demand for ULM decking, along with the expansion of channel partnerships and a customer base that favors larger, established players, have increased industry concentration.

For example, the top four players increased their market shares and now account for over 75Vo of the market, compared to 65Vo in 2008. The top l0 suppliers now account for over 957o of the market, compared to 9O7o in 2008.

"Wood decking and railing, including pressure treated, cedar, redwood, other softwoods, and imported hardwoods, still command the major share of the decking and railing market, on a volume basis, and have maintained their market share position against plastic-based decking and railing products since 2005," Van Kouteren said. "In fact, wood had stopped market share losses to plastic alternatives and actually increased share by a few points in 2009. We believe that the new ULM composite and cellular vinyl decking products, now being offered at various price points, will reignite market share growth for synthetic decking and railing over wood. However, the capped products need to perform as advertised."

"I would generally agree that ULM products will win in a lot of solid wood applications," said George Layton, director of sales & marketing for Canfor Southern Pine, Myrtle Beach, S.C. "Manufacturers are now making better products, and with the baby boom generation getting older and wanting less maintenance and Generation Y'ers not knowing how to maintain an outdoor deck, solid wood decking material will play a more limited role. Cost is still a large driver, and wood will continue to win when that is a consumer's largest concern."

Indeed, the study admits price has been the determining factor. According to Principia, "Wood prices, a key driver in demand for wood alternative products, dropped wildly through the worst of the downturn, creating the largest price spread between engineered composites versus treated lumber. Persistent high petroleum prices affected costs of raw material feedstock for wood alternative materials. The result has been a growing price gap between wood and wood alternatives affecting intermaterial competition."

In addition, price isn't the only advantage wood has over composites, according to James Riley, chief marketing officer at Great Southern Wood Preserving, Abbeville, Al. "The new preservatives that are now on the market, like the micronized treatment that we use in our YellaWood brand products, enable us to produce a product that's lighter in color, making it easier to paint and stain and giving the user considerable flexibility," Riley said. "It also provides environmental certifications consumers expect today.

"Wood protection companies are not only offering new products with improved stability, but more environmentally friendly preservatives with lower or no heavy metal content," said Keith Hanis, v.p.-marketing for Cox Industries, Orangeburg, S.C. "These new preservatives are available in high-end wood products, for instance 2x6 virtually clear decking, which delivers the true beauty of real wood. After all, consumers realize plastic alternatives are trying to mimic the look of real wood. Combine this with a coordinated effort from wood trade organizations and U.S. forestry commissions to deliver the message that real wood is the only truly sustainable and renewable building material available, and I think wood decking can hold its position and perhaps grow market share among discerning consumers that value the feel and beauty of real wood products."

"Consumers definitely want a low maintenance decking product, but some treated wood producers, including Pacific Wood, are close to introducing lower maintenance treated wood products that contain powerful water repellants and longer-lasting pigmentation, as opposed to the more quickly degraded stains and dyes," said Elaina Jackson, chief operating officer for Pacific Wood Preserving Cos., Bakersfield, Ca. "This water repellant pigmented wood, when combined with textured deck boards, can result in a very low maintenance wood deck, with the powerful selling point that it is indeed real wood."

At McFarland Cascade, Tacoma, Wa., sales of pressure treated decking have held up better than pricier alternatives. "I do see the capped products doing well, but I'd question their ability to affect the sales of treated decking that would fall in the range of one third the price or less," said sales manager Phil Schumock. "More than likely, the capped products will cannibalize the mid-range, uncapped WPC decking products, while mid-grade cedarhedwood and treated decking will compete for the entry level market."

Cox's Harris added, "Obviously, there will continue to be a battle for decking market share, but lumber remains cheap and it doesn't look like the price will change dramatically anytime soon, so even the lower-cost alternatives remain substantially more expensive than real wood. In fact, petroleum prices could have alarger impact on plastic products, depending on their formulation."

Principia expects overall decking and railing demand to grow by aboutSTo per year, on a value basis, through 2013. The high growth rate is partly due to price increases for plastic-based products, continued product mix shifts, and solid growth in new home construction and remodeling in 2O12 and 2013. However, there is considerable downside risk in the forecast as housing prices and the inventory of foreclosed homes dampen the demand for new homes, as does the stalling of the economic recovery.

"So far this year," said Steve Lillard, Madison Wood Preservers, Madison, Va., "we have seen an across-theboard decrease in demand for decking. Having experienced a great first quarter, April and May were off substantially. The small amount of remodeling and the low availability of credit or cash seem to be the largest hurdles to overcome. Whereas I do believe wood has a larger price advantage than in years past, it is being over-shadowed by the socalled'recovery."'

In the final analysis, the rise of ULM may hinge on a rejuvenated construction industry-which would also benefit wood. Treated might get a slightly smaller percentage of the pie, but the pie would be a whole lot bigger.

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