Transformative Technologies - Federal Initiative IidentifierSeries Final Report 2008/09
W-2635
Location
Vancouver, British Columbia
Language
English
Abstract
The past year was marked by further market penetration by wood plastic composites (WPCs), although at lower rates than those seen in the previous few years. WPCs now account for 24% of deck surface and 10% of porch surface areas installed in North America. The market also witnessed the introduction of new applications for WPCs such as fencing (3% of market) and siding (0.1% of market) which have made gradual inroads as technical issues have been overcome. It was also a year marked by technical innovations, lawsuits and structural changes. In global terms, the high prices of petroleum and resins was the main driver of profitability, along with a reduced demand in the R&R US market, which drives 85% of decking and railing consumption. An additional issue for Canadian manufacturers was the devaluation of the US dollar which hurt export markets. As a consequence of sawmill curtailments and closures there has been increased competition for sawdust which is used in the wood flour component of WPCs.
A detailed feasibility analysis was conducted for a hypothetical WPC plant in Canada. The exercise considered two locations, one in the West and one in the East. The products to be produced were engineered decking and railing. The results suggested a tough market environment for decking with little or no advantages given the current conditions (high resin prices and low demand and excess inventory given the U.S. housing crisis). The East location showed a slight advantage over the West. Unlike decking, railing showed good margins. Distance to markets and distribution disadvantages make this business proposition a challenging one. However, sensitivity analysis suggests that an improvement in demand and prices could narrow the gap between costs and a break even point, especially considering the conservative approach to pricing that this study followed, with US$1.56/LF FOB mill.
The North American market for WPCs is over $1 billion , and categories such as decking and railing (D&R) are expected to grow in value at 7+% annual rates for the next 5 years as it moves from traditional non-structural applications into new and/or more structural applications, captures higher market share from preservative treated (PT) lumber, and as high-end products increase their participation in the mix. Among structural applications, 2009 has seen the use of WPCs in bridge construction.
D&R accounts for over 80% of the total value for WPCs, followed by windows and doors parts (12%). WPCs have successfully captured around 24% of the $4.3 billion 2007 North American market for D & R, mostly from treated lumber and plastic lumber. This growth is mostly driven by repair and remodeling (85%), followed by new housing. Nonetheless, the potential total market for WPCs remains mostly untapped.
Alternatives for decking applications include naturally durable species (IPE, cedar, redwood), other PT lumber (including southern yellow pine (SYP), and conifers from South America and Scandinavia), vinyl, aluminum, and others.
Current WPC applications include: decking, railing, windows and door parts, roofing, picnic tables and benches, fencing, landscape timber, patios, gazebos, pergolas, auto parts, playground equipment, etc. Other applications are under development, such as siding, fencing, bridge decking, foundation isolation elements, marine structures (chocks, wales, pier decking), laminate flooring, residential furniture (bathroom/kitchen cabinets & patio furniture), utility poles, railroad tiles, exterior & interior trim (window and door (W&D) components, molding and millwork).
In 2007/2008 there were about 30 main WPC producers in the US and Canada, with the top 5 holding a 70% share of the market value and the top 20 concentrating 97% of the market value. The year 2008 saw several Canadian companies go under, the most notable being Brite Manufacturing.
Intellectual property continues to be an issue in this industry where some companies fiercely defend their competitive advantages via litigation.
There is a big need for education of potential specifiers of WPCs as they currently show a low level of awareness and or knowledge. During 2008, industry-wide efforts led by the North American Decking and Railing Association tried to address this issue via training for contractors, suppliers and specifiers.
Agricultural fibers have been used for decades in the automotive industry, with Europe as leader. Rice hull has been and will continue to be used, given its good properties (low water intake, lack of digestible nutrients that support the growth of mold and mildew), availability, and distribution channels. The latter points will likely limit the use of crop fiber only to species already readily available (e.g. wheat straw). A notable case of a company who has successfully used agrifiber is AZEC Building Products, with a 20% flax/80% PVC composite.
Bioplastics continue to show great potential, especially for the packaging and automotive industries. However appealing, the use of bioplastics cannot be assumed to be environmentally harmless, but has to be determined through case by case analysis. Some biopolymers are partially biodegradable, some are not. Other issues include difficulties with recycling such as cleaning and sorting. Recent developments in Brazil include the development of the first sugar cane-based polyethylene. The developer company –Braskem- claims this resin has the same properties as the petroleum-based counterpart.
As for nanocomposites, despite promising findings, more research is needed until this technology can be commercially utilized to a greater extent. For instance, nanocellulose crystals may find a place in solid applications, especially given its favorable properties for surface resistance. Last year, some Chinese manufacturers used nanoscopic board coating to make them resistant to aggressive, corrosive and adhesive substances. Apparently the market failed to give a premium for these properties, as suggested by Onix-Luxrae’s cease of operations.
Consequently, even though these exciting new developments may present opportunities for some Canadian companies, it may be advisable to concentrate on potential sustainable competitive advantages, suitable for IP protection and first mover advantage. Along those lines, softwoods have made an inroad in wood flour production and there is evidence suggesting the suitability of mountain pine beetle (MPB)-damaged wood for WPCs. Current research initiatives are looking at using fibre from MDF operations.